An Analysis of Transaction Costs in the Evolution of China’s Household Registration System

Abstract

This paper examines the impact of reforms to relax urban household registration requirements on the institutional transaction costs associated with the migration of rural-to-urban populations and explores pathways for optimizing the household registration system. Drawing on transaction cost theory and the theory of coercive institutional change, the study categorizes migration costs into three types: pre-contractual arrangements, public service provision, and the enforcement of labor rights. It employs a variety of research methods to trace the evolution of household registration policies and conducts a multidimensional analysis using statistical data from 2015 to 2024. The study finds that relaxing household registration requirements can mitigate some of the transaction costs associated with migration. However, due to constraints such as tiered control over household registration, the dependency of public services on household registration status, and deficiencies in land exit and fiscal burden-sharing mechanisms, these costs cannot be completely eliminated. Relying solely on household registration reform is insufficient to resolve the challenges of urban integration; rather, it is necessary to improve supporting institutions to advance the reform in a coordinated manner.