Precautionary savings and rural‐to‐urban migration: Evidence from Chinese hukou status

Abstract

AbstractRural‐to‐urban migrants account for more than one‐third of the total population in China. However, because of China's hukou system, urban migrants can have limited access to different public services in urban areas. Consequently, this can affect their consumption and savings behaviour. However, little is known about how the hukou system changes migrants' allocation of savings across different savings instruments. In this study, we utilize the 2013 round of the Urban and Rural Residents Income Distribution and Living Conditions Survey of China to see if migrants' hukou status affects allocation between short‐term and long‐term assets. Propensity score matching is used to match migrants with migrants who have obtained urban hukou. When comparing the urban migrants having rural hukou with hukou holders who converted their hukou from rural to urban, we find that the migrants hold significantly higher proportions of savings in cash and other short‐term assets. Those who have obtained urban hukou, appear to hold a greater share of their portfolio in long‐term, higher returning assets. The differences in portfolio allocations appear to be larger for migrants with lower household income. We argue that these results are consistent with savings behaviour driven by a precautionary motive.