Labor mobility and corporate wage inequity: Evidence from the Hukou reform in China

Abstract

This paper investigates the causal effect of labor mobility on corporate wage inequity. By using China’s Hukou reform in 2014 as an exogenous shock, we find that labor mobility is positively associated with corporate wage inequity. Our results are robust to a series of endogeneity and robustness analyses. One potential mechanism driving our results is that the Hukou reform has increased the labor supply in cities, thus reducing employee wage, especially for ordinary employees, and contributing to an increase in corporate wage inequity. Our results are more significant in regions with high institutional quality, or high labor demand and firms with high labor productivity, or low corporate social responsibility.