How does inflow areas' fiscal pressure affect the employment of migrant labor in China?

This study examines the impact of value-added tax reform on labor mobility. Utilizing individual-level data from China's Migrant Population Dynamic Monitoring Survey from 2012 to 2018 and city-level statistical data, and treating the 2016 value-added tax revenue sharing reform as a quasi-natural experiment, we find that increased fiscal pressure in destination cities significantly inhibits inter-city labor mobility. Heterogeneity analysis indicates that this negative effect is more pronounced among low-income households and in economically developed cities. Mechanism analysis indicates that fiscal pressures adversely affect labor mobility primarily by reducing public service provision and increasing housing costs. Governments should optimize public service distribution to mitigate the negative impacts of fiscal pressures on migrant workers, thereby promoting social integration and stable employment among migrant populations. • The migrant is investigated at the inter-city level. • The employment crowding-out impact of fiscal pressure in inflow cities is explored. • The results remain robust after several tests. • The heterogeneity and mechanism are both verified from dual perspectives.