Internal migration policy and migrants' mental health: Evidence from China's hukou reform

Global migration flows continue to expand, with internal migration in developing countries experiencing particularly rapid growth. This paper examines the mental health effects of migration liberalization policies in China, a developing country with one of the world's largest internal migrant populations. We utilize nationally representative data from the China Labor-force Dynamic Survey (CLDS), combined with manually collected information on the timing of city-level hukou reforms. We exploit the policy announcement date as an exogenous shock and implement a time-based regression discontinuity design (RDD), using the number of days before and after the local policy announcement as the running variable. Our findings reveal that hukou liberalization significantly improves migrants' mental health. We find that social integration, improved future expectations, and increased physical activity serve as the key mechanisms through which hukou reform enhances migrants' mental health, while labor market outcomes do not appear to play a significant role in the short term. These findings offer important insights into how relaxing internal migration restrictions affects psychological well-being in developing countries and provide policy implications for improving migrant welfare. (JEL: I10, I38, J61, R23).