Social Identity and Inequality: The Impact of China's Hokou System

They conduct an experimental study to investigate the causal impact of social identity on individuals' response to economic incentives. They focus on China‟s decades old household registration system, or the hukou institution, which categorizes citizens into urban and rural residents, and favors the former over the latter in resource allocation. Their results indicate that making individuals' hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent. This leads to a leftward shift of their earnings distribution – the proportion of rural migrants below the 25th earnings percentile increases significantly by almost 19 percentage points. [Working Paper No. 190]