Migration Barrier Relaxation and Entrepreneurship : Evidence from the Hukou Reform in China

We study the impacts of relaxing internal migration barriers on entrepreneurship by exploiting China’s 2014 nationwide hukou reforms and the administrative firm registry. Our difference-in-differences estimation finds that treated counties meet sizable increases in entrepreneurial activities relative to counties without reforms. The effect is most prominent in establishments of firms with a smaller scale and a lower likelihood of survival, indicating moderate expansions in labor demand. Migrant workers’ wages decline and entrepreneurial activities improve most in labor-intensive industries, implying that increased labor supplies serve as one underlying mechanism. Our findings highlight the important role that removing domestic labor market frictions plays in promoting entrepreneurship