Hukou Matters: The heterogeneous local labor market effects of export expansions in China

Abstract

This paper studies the effects of export expansions between 2000 and 2015 on China's local labor markets, focusing on the heterogeneous effects for people with different Hukou statuses. We find that rising local exports increased manufacturing and service-sector employment shares but decreased agricultural employment share for non-local-urban-Hukou residents, including local-rural-Hukou people and cross-prefecture migrants. On the other hand, trade expansions decreased the likelihood of employment and service-sector employment for local-urban-Hukou people. We provide evidence on the substitution and wealth effects for the “crowding-out” of local-urban-Hukou people out of employment.