“China’s 'Great Migration': The impact of the reduction in trade policy uncertainty”

“China’s “Great Migration”: The impact of the reduction in trade policy uncertainty”

Giovanni Facchini, Maggie Y. Liu, Anna Maria Mayda, Minghai Zhou

In: Journal of International Economics, 2019, Vol. 121, pp 126-144

Facchini et al. analyze the effect of China’s integration into the world economy on workers in the country and show that one important channel of impact has been internal migration. Specifically, they study the changes in internal migration rates triggered by the reduction in trade policy uncertainty faced by Chinese exporters in the U.S. This reduction is characterized by plausibly exogenous variation across products, which they use to construct a local measure of treatment, at the level of a Chinese prefecture, following Bartik (1991). This allows them to estimate a difference-in-difference empirical specification based on variation across Chinese prefectures before and after 2001. They find that prefectures facing the average decline in trade policy uncertainty experienced a 24% increase in their internal in-migration rate – this result is driven by migrants who are “non-hukou”, skilled, and in their prime working age. Finally, in those prefectures, working hours of “native” unskilled workers significantly increased, and internal migrants found employment in the places they migrated to.