Internal Migration Liberalization and Housing Market: Evidence From a Hukou Reform in China

This paper examines how relaxing internal migration restrictions affects housing markets. We exploit China's gradual roll‐out of hukou reform across cities starting in 2014, which substantially removed internal migration barriers. Using a difference‐in‐differences approach, we find that hukou reform increases housing prices in urban areas by 2.3%. Mechanism analysis reveals that the reform expanded housing demand by increasing urbanization rates, improving income and employment conditions, and lowering settlement barriers for low‐skilled migrants, while we find no evidence of supply‐side responses in terms of local governments' residential land provision. Our heterogeneity analysis provides evidence that cities offering more desirable public services and amenities are more attractive to potential migrants, and that such advantages are capitalized into local housing prices following hukou reform. Additionally, we document spillover effects, where hukou reform implementation in provincial capitals generates positive spillovers that boost housing prices in neighboring cities, while ordinary cities do not produce similar effects.