Research On The Effects Of Labor Migration On Rural Households’ Financial Decisions

This paper investigates the impact of migration of rural labor to urban areas on rural households’ financial decisions.The mass migration of labor from rural to urban areas is the main manifestation of migration in China at present and in the past decades.According to the data of the National Bureau of Statistics of China,the number of migrant workers working outside the territory of the township where their household registration is located reached up to 171.72 million in 2021,increase by 31.31 million than 2008,and although the growth rate has declined in recent years,the number still maintains growth momentum.As an effective way to achieve the rational allocation of labor factors,urban-rural migration has made a significant impact on boosting China’s industrialization and urbanization process and promoting the high-quality development of China’s economy,while also having a profound impact on migrant households and the rural economy in the state of population outflows.Based on the existing literature,this paper explores the impact of rural labor migration on household financial decisions from a micro-household perspective,providing empirical evidence and complementing the literature on the economic influence of labor migration.This paper investigates the impact of labor migration on rural households’ financial decisions through a combination of theoretical and empirical approaches.In the theoretical model analysis,on the one hand,the probability of household migration is introduced into the model,and it is deduced that labor migration raises the household saving rate,which will further increase with the raise of future uncertainty.On the other hand,introducing the debtor default rate into the household lending function and analyzing the utility function of debtor default,it is found that an increase in the dependence of migrant households on social networks promotes household lending.In addition,this paper also constructs a theoretical analytical framework for the entrepreneurial spillover effects of labor migration from four perspectives:risk preference,human capital investment,information acquisition,and informal borrowing,respectively.Based on data of China Family Panel Studies(CFPS),this paper investigates the impact of labor migration on rural households’ financial decisions in term of household saving,household lending,and household entrepreneurship,and the main findings of this paper are as follows:First,labor migration significantly improves the household saving rate.The mechanism exploration finds that labor migration leads to a significant increase in household income,among which,wage income increases significantly,business income decreases significantly,property income and transfer income do not change significantly.Labor migration does not significantly affect household total consumption,while consumption of clothing and daily necessities significantly increase,consumption of transportation and communication,education and entertainment significantly decrease.Further exploration reveals that the increase in income due to labor migration satisfies the need of migrant households to save preventively to cope with uncertainties such as income risk,unemployment risk,health risk and medical risk,which leads to a significant increase in household saving rate.Heterogeneity analysis shows that the effect of labor migration on household saving rate is more pronounced in the sample of low-and middle-income households,low social capital households,young and old households.Finally,this paper finds that nonacademic education,formal academic education,and commercial insurance participation significantly reduce the impact of labor migration on household saving rate,suggesting human capital investment and commercial insurance participation effectively weaken the uncertainty and precautionary saving motive of migrant households.Second,labor migration significantly increases the probability of household lending and the amount of per capita lending.The mechanism exploration finds that labor migration increases the demand and dependence of migrant households on rural social networks,leading to a greater incentives for migrant households to maintain rural social networks by increasing lending,as evidenced by the fact that labor migration has a greater effect on households with older left-behind members,households without young and strong laborers among left-behind members,and households with left-behind members mainly engaged in agricultural production activities.Heterogeneity analysis shows that the effect of labor migration on household lending is more pronounced in low-income households,households with low human capital,and left-behind members with poorer health status.Finally,this paper finds that the enhanced accessibility of elderly care services and basic education resources cannot effectively weaken the effect of labor migration on household lending,suggesting that the social networks built on kinship,local ties and friendship play an irreplaceable role in reducing the uncertainty of migrant households.Third,the increase in the scale of labor migration of other households in the same village or county has a significant spillover effect on the entrepreneurship.On average,each 10% increase in the proportion of other household labor migration in same village or county increases the probability of entrepreneurship by 0.18% and 0.47%,respectively,which account for 3% and 7.66% of the proportion of household entrepreneurship.Moreover,the number of participants in entrepreneurship,asset,profit,share of business income in household income,total income,probability of new business creation and number of participants,and persistence of entrepreneurship all improved.The mechanism analysis shows that the expansion of the scale of labor migration in the same village or county raises the level of risk preference,increases the household’s motivation to participate in technical skills training,broadens the household’s access to information,and makes a significant elevating effect on the amount of informal borrowing,thus producing a significant spillover effect on household entrepreneurship.The results of heterogeneity analysis indicate that the entrepreneurial spillover effect of labor migration is more pronounced among middle-aged households,low human capital households,high social capital households,and households in the eastern region.Finally,this paper finds that labor migration has a greater entrepreneurial spillover effect on rural areas with relatively weak non-agricultural industrial base and rural areas with higher degree of financial constraints,indicating that labor migration provides effective support for exploring entrepreneurial opportunities and developing consumption markets in rural areas with weak nonagricultural industrial base,reflecting the inclusive effect;at the same time,it provides an effective informal channel support for rural areas with lower degree of financial development to overcome the problem of entrepreneurial financing,which has the effect of “send charcoal in the snowy weather”.In conclusion,based on the existing literature,this paper provides evidence for understanding the impact of labor migration on rural households’ financial decisions and the potential mechanisms,and the findings of this paper can also provide references for relevant policy formulation.