Should We Have Been Born Urban: Hukou Types and Dual Labor Market at Southeast China in 2005

Qiang Ren, Peking University
Qiang Fu, Duke University

From 2005 1% National Population Sample Survey dataset in southeast China, this paper establishes China’s dichotomous household registration system (hukou) as an effective and unprejudiced signal to reflect labors’ human capital. It is found that wage disparity in people with different hukou status is largely explained by returns to education. Meanwhile, the gap of returns to education among people with different hukou status is found to enlarge as years of schooling decrease and reaches its peak in primary education. Further evidence reveals that labors' human capital is largely determined by whether they were born in urban areas and received primary and junior secondary education there. Based on this rural-urban inequality in education, a dual labor market would be inevitable in contemporary China, which might help us understand the nature of China's rural-urban migration.