Association for Public Policy Analysis & Management

Nowadays hukou distribution is not entirely by birth but somewhat Chinese people can self-select their hukou status based on their ability which causes selection bias while estimating earning equation by hukou types. To avoid this selection bias, this paper estimates hukou-based earning discrimination by matching Chinese individuals based on a substantially rich set of individual-, family-, and societal-level characteristics. By deploying a nationally representative dataset from the 2014 China Family Panel Studies (CFPS), I find that there is considerable earning discrimination against agricultural hukou Chinese. I further investigated the discriminatory effect of hukou registration within different work ownership, work types, employer types, and labor contracts conditions. I find that earning discrimination exists in China when they are employed by others rather than self-employed, when they are employed by the government face higher discrimination compared to when they are employed by private firms. Similarly, they face higher discrimination in the workplace where a labor contract is enforced. Discrimination exists in both agricultural and non-agricultural jobs but high in non-agricultural jobs. Thus, I argue that earning discrimination by hukou is not due to rural-urban segregations rather they are systematic and institutionally-enforced.