Return Migration and Household Financial Behavior in China

ABSTRACT This paper examines the causal effect of return migration on household financial market participation in China, drawing on the New Economics of Labor Migration (NELM) framework. Using three waves (2017–2021) of the China Household Finance Survey (CHFS), covering 69,511 household‐wave observations, we employ inverse probability weighting (IPW) to address selection into return migration. IPW estimates indicate that return migration increases the probability of holding risky financial assets (stocks, mutual funds, wealth management products) by 1.67% points in the full sample, 3.58% points in urban areas, and 0.36% points in rural areas. The attenuation from OLS to IPW confirms positive selection, and bound analysis indicates that unobserved confounding is unlikely to overturn the main results. Mechanism analysis identifies wealth accumulation as the primary channel, explaining 45%–58% of the effect, suggesting that policies reducing investment thresholds could further promote financial inclusion among return migrants.