Hukou As Benefits: Demand for Hukou and Wages in China

As China encourages urbanisation, a necessary process is the urbanisation of its people, granting local-urban hukou, or local citizenship, to migrant populations. But reforms encouraging urbanisation are dependent on migrant populations wanting to become formal, registered urban residents. What is the demand for hukou? Based on a unique probabilistically-sampled contingent valuation survey of over 900 migrants in Beijing and Changsha, we use migrants’ willingness-to-pay for hukou as a measure of demand for urbanisation. We find that migrants in Beijing are willing to give up between 9% and 14% of their income over five years to gain local-urban hukou. Migrants in Changsha are much less willing to pay for hukou with a willingness-to-pay indistinguishable from zero, and rural migrants have a negative willingness-to-pay. This study contributes to the broader literature on the impact of China’s hukou system by providing a unique test of migrant workers’ willingness-to-pay for local citizenship.