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Labor Migration, Hukou System and Urban-Rural Disparity
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TitleLabor Migration, Hukou System and Urban-Rural Disparity  
AuthorZhang Wei-jin, Hu Chun-tien, Fang Chen-ray  
OrganizationJinhe Center for Economic Research, Xi’an Jiaotong University;Departments of Economics, Chinese Culture University;Departments of Economics, National Taipei University,, 
Key WordsDual Economy; Rural-urban Migration; Hukou System; DSGE Model 
AbstractIn this paper, we construct a DSGE model to analyze the extent to which urban-rural disparity is affected by labor reallocation between urban and rural areas, an institutional change in Hukou system, and various shocks on the economy. We estimate our model using Bayesian method and data from 2000 to 2012, and the results indicate that the model replicates the observable data well. Our main conclusions are as follows: (1) favorable rural productivity shocks and positive monetary shocks mitigate urban-rural disparity in income and consumption. (2) Sector consumption is mainly explained by sector-specific preference shock, respectively; urban income is mainly explained by urban productivity shocks, while rural disposal income is primarily explained by migration costs shocks. (3) Whether it is in the short run or in the long run, an institutional change through lowering labor migration costs increases income and consumption in both areas and mitigates urban-rural disparity. 
Serial NumberWP615 
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