Background: According to recent estimates, there are over 260 million people migrating for work within China, and over 58 million children of migrants live apart from one or both parents. Due to the unique hukou (residential permit) system in China, access to government services for children such as schools and hospitals varies by location and migration status. Policy makers are concerned about the healthy development of the children of migrants and other rural hukou children as part of increasing concern about inequality in China; changes to the rights of migrants made headlines as recently as this month. In this context, an analysis of the implications of policy changes for the human capital development of rural hukou children could be relevant.

Model: To capture how parents make decisions related to child human capital under various policy regimes, I develop a structural model based on the Solon (2004) extension of Becker and Tomes (1979). In the model, parents care about their own current consumption and their child’s future earnings; they can choose between multiple migration scenarios (migrating and bringing their child, migrating and leaving their child behind, or staying in the rural area), and they can choose their levels of time and monetary investments in their child subject to practical constraints.

Analysis: I consider three government policies designed to improve the human capital of children with rural hukou and apply the model to analyze parental reactions including changes in migration status and parental investments in children. The three policies I consider reflect recent and proposed policy changes in China: increases in government services for rural non-migrants, training of rural caregivers, and increases in government services for rural migrants (in the extreme case, hukou reform). I have signed comparative statics using the theoretical model and constructed a numerical example based on simulation of hypothetical populations. Before the conference I will calibrate the model using previous literature and population moments and construct an empirical example, using the introduction and rapid expansion of the New Cooperative Medical Scheme to track parental responses to an increase in generosity of government services for rural non-migrants.

Results: I find that possible changes in government policy vary in their effects on rural hukou children. Because of opposite-signed effects among movers and non-movers, increasing government investment in children in rural areas does not necessarily yield a positive influence on the human capital of rural hukou children at the population level. In contrast, raising governmental support for migrant children in urban areas increases parental time investment without decreasing total monetary investment in children, and is the best policy considered.