Urban Policy and Research
ISSN: 0811-1146 (Print) 1476-7244 (Online) Journal homepage: https://www.tandfonline.com/loi/cupr20
Cross-Border Migration of Hong Kong Residents
Under the ‘One Country, Two Systems’ Policy
Rebecca Lai Har Chiu & Michael Ho Cheung Ho
To cite this article: Rebecca Lai Har Chiu & Michael Ho Cheung Ho (2005) Cross-Border
Migration of Hong Kong Residents Under the ‘One Country, Two Systems’ Policy, Urban Policy and
Research, 23:3, 305-327, DOI: 10.1080/08111470500197847
To link to this article: https://doi.org/10.1080/08111470500197847
Published online: 19 Aug 2006.
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Urban Policy and Research,
Vol. 23, No. 3, 305–327, September 2005
Cross-Border Migration of Hong Kong
Residents Under the ‘One Country,
Two Systems’ Policy
REBECCA LAI HAR CHIU & MICHAEL HO CHEUNG HO
The Centre of Urban Planning and Environmental Management, The University of Hong Kong, Hong Kong
ABSTRACT Hong Kong is known as a migrant city because its population was sourced from
mainland China, and because there has always been outflows of people to overseas countries,
especially from the mid-1980s to mid-1990s. Emigration to mainland China has become a significant
recent trend. This article discusses this phenomenon in the theoretical contexts of migration and
trans-border residential development. It contends that the trend will intensify more quickly than
other cross-border movements because the two systems are separated by a political border within
one country, and because there are common cultural ties and rapid economic integration.
KEY WORDS: Cross-border movement, residential relocation, border zones, logit model
Introduction
Hong Kong is known to be a migrant city. Its population originated from migrants from
mainland China. Since its inauguration as a British colony in 1841, there have been waves
of mainland Chinese moving in and out of Hong Kong, often linked to significant political
and social events in China (Skeldon, 1995). As late as 2001, 33.7 per cent of the Hong
Kong population were born on the mainland (Census and Statistics Department, 2001a).
Simultaneously, Hong Kong residents also left the city to move overseas. Back in the early
colonial times, it was the ideal entrepôt for emigrants from China due to its international
transport linkages and its insulation from the Chinese bureaucracy (Sinn, 1995). Except for
a few years in the mid-1960s, the balance of immigration and emigration was generally
positive until the mid-1990s. The volumes of movements had nonetheless expanded
quickly both ways since the early 1980s. The increase in the inflow was due to the opening
up of China, and the regularization of mainland entrants to Hong Kong with set quotas.
The rapid expansion in the outflow was due to the uncertainty of the future of Hong Kong
after 1997 (Skeldon, 1995). Since the late 1990s, recorded emigration to overseas
countries had dropped significantly to, for example, 9600 people in 2003, while
Correspondence Address: Rebecca Lai Har Chiu, The Centre of Urban Planning and Environmental
Management, The University of Hong Kong, Pokfulam Road, Hong Kong. Fax: þ 852 2559 0468; Tel.: þ 852
2859 2727; Email: rlhchiu@hkucc.hku.hk
ISSN 0811-1146(print)/ISSN 1476-7244(online)/05/030305-23 q 2005 Editorial Board, Urban Policy and Research
DOI: 10.1080/08111470500197847
306
R. L. H. Chiu & M. H. C. Ho
immigrants from the mainland stayed at 53 500 per annum (Hong Kong Special
Administrative Region Government, 2003).
Emigration from Hong Kong in the 1950s and 1960s was basically rural-based, with
low-skilled village people moving into the restaurant or low-paid service business in
Britain. The scale was also small, with no more than 2000 or 3000 per annum. The
emigration patterns in the 1980s and 1990s were different: it was urban-based and was
characterized by highly skilled and educated people (Skeldon, 1995). While the
emigration volume stayed at around 18 300 – 22 300 between 1981 and 1986, it started to
take off in 1987, increasing to 30 000 in that year. The outflow reached the peak in 1992,
with 66 200 leaving Hong Kong in that year alone. From 1987 to 1997, a total of 534 700
people with skills or capital had left Hong Kong! There were concerns in the community
that there would be an insufficient skilled labour force to maintain Hong Kong as a
regional financial and commercial hub. Fortunately, emigration has tapered off since 1997
despite the economic depression ensued by the Asian financial crisis in 1998, declining
from 19 300 in 1998 to 9600 in 2003. The most favoured countries of destination were
Canada and Australia. Though without official record, a large number of the emigrants had
eventually returned to Hong Kong as the economy in the two countries went through
trough periods, as reflected by the fact that as high as 290 000 Hong Kong permanent
residents in 2003 bore foreign nationality (Price Waterhouse, 1989; Hong Kong Special
Administrative Region Government, 2003).
While the international emigration trend has subsided, the move to mainland China has
become the most significant trend in recent years. The border between Hong Kong and
mainland China had been practically closed since 1949 until China launched its Open
Door Policy in 1979. The initial major economic activity in the 1980s was the relocation of
industrial operations from Hong Kong to the mainland by manufacturers, owing to the
gross difference in production costs. Close economic cooperation subsequently developed
between Hong Kong and the neighbouring Guangdong province (Figure 1), especially the
Pearl River Delta region and the Special Economic Zone of Shenzhen adjacent to Hong
Kong (Yang, 2002). In the first two decades of China’s Open Door Policy, capital
originated from Hong Kong represented 67 per cent of the US$101.7 billion of the total
foreign investment utilized in Guangdong. Over the years, the relationship between the
two places has evolved from cross-border manufacturing operations to regional economic
integration (Tuan & Ng, 2002), which inevitably engenders increasing movements of
people and goods.
The incremental economic integration since 1979 has induced cross-border housing
consumption from Hong Kong to mainland China owing to the price and quality
differentials. Survey results show that the cross-border housing consumption is mostly for
second home usage, but there is an increasing trend of permanent residential relocation
away from Hong Kong. The expansion of economic and residential activities into the
mainland and the intensification of the infrastructure links between Hong Kong and its
neighbouring areas have in effect extended the geographical boundary of Hong Kong,
enabling it to spread its urban growth beyond the political border.
This article discusses the above urban phenomenon in the theoretical contexts of urban
relocation, particularly international migration and cross-border movement. It initially
reviews the theoretical literature on relocation, then analyses the general cross-border
housing activities of Hong Kong consumers under the short-distance and long-distance
residential relocation framework, identifying the linkage among relocation, labour
Cross-Border Migration of Hong Kong Residents
307
Figure 1. Location of Hong Kong, Shenzhen and Guangdong
mobility, employment and lifestyle. It subsequently applies the logit model to analyse the
results of a questionnaire survey on the intention to move across the border, identifying the
characteristics of households who are most likely to relocate to the mainland. The article
contends that the trend of cross-border migration between Hong Kong and mainland China
will intensify more quickly than in other places because the border is a political boundary
within a country, and because there are common cultural ties and rapid economic
integration.
Residential Relocation and Cross-Border Movement Decisions
Major theories on residential location were often derived from observations of Western
cities (Alonso, 1964; Muth, 1969). There has also been very limited research on transborder residential mobility generally, let alone specifically on the case of Hong Kong and
mainland China. In most cases, trans-border relocation moves often result in displacement
that is beyond intra-urban migration, though strong ties are usually maintained with the
origin city, involving frequent commuting across the border. Therefore, the cross-border
residential relocation between Hong Kong and the Pearl River Delta does not exactly fit
into the contexts of international or internal migration. Although it may be classified as
internal migration within a nation, the ‘One Country, Two Systems’ policy does not allow
bilateral free flows of capital, goods and people. Also, owing to the long separation from
308
R. L. H. Chiu & M. H. C. Ho
1842 to 1979, the differences between Hong Kong and cities in Guangdong are so great
that they cannot be treated as cities within a nation with similar social, political and
economic setting. A review of the general literature on residential relocation is nonetheless
useful for analysing the cross-border movement of the Hong Kong population.
Residential relocations can be short-distance or long-distance movements, and they are
the outcome of a number of considerations. This section reviews the factors, as discussed
in the literature, which affect relocation decisions, and attempts to distinguish factors that
are unique to cross-border migration.
Explanations for Short- and Long-Distance Relocations
Factors affecting residential relocations including international migration can be many and
varied. The major factors are, nonetheless, employment, labour mobility, trade-offs
between various costs and benefits, levels of dissatisfaction with existing residential,
family life cycle and lifestyle. Tenure mode may also be significant as it affects the costs of
relocation. In the case of international migration, socio-cultural issues including language
and education system may loom large. Among these factors, employment seems to be of
greatest significance.
Employment and education. Decisions on workplace location and residence location are
closely related for people who do not work at home. Using census tract data from the
Boston metropolitan area where commuting is relatively convenient, Deitz (1998) finds
that for short-distance moves such as intra-urban relocation, household location
determines its employment location, but not the other way round. In contrast, longdistance moves, ranging from inter-city to out-of-country migration, are often induced by
changes in employment. Another important factor is the key stages of life-course (Plane &
Heins, 2003). The most obvious example is the moving out of the big cities by retirees due
to the push factors such as the less desirable living conditions (Fokkema et al., 1996). They
are also often enticed by the pull factors of the destination, such as milder weather and
better elderly community. Another reason for long-distance moves is job-related crossborder relocation, triggering migration flows of skilled workers (Straubhaar, 1988),
especially between places with different income levels (Saith, 1997).
There are close interrelationships among residential mobility, labour market mobility
and commuting (Van Ommeren et al., 1999). Education attainment is an indicator for
human capital and directly affects the marketability of the worker. In fact, relocation can
improve the return on human capital and hence income when job-related migration is
interpreted as workers seeking better opportunity to maximize the returns on their human
capital (Porell, 1982). Education attainment thus affects labour mobility and hence
residence mobility in which highly educated persons would be more mobile in terms of
long-distance moves than those with less education and low skill workers (Ehrenberg &
Smith, 1985). One explanation is that residence relocation incurs moving costs which is
positively related to the distance of the move, thus the migration costs of a long-distance
move may make relocation unaffordable to unskilled workers because of their low-wage
income (Schiff, 1994).
Utility maximization and life-course. When considering residential relocation, economic
factors may play a more significant role for older households than younger families as
Cross-Border Migration of Hong Kong Residents
309
savings on the overall living expenses are important to retirees who rely on fixed
pension income (VanderHart, 1998). They can arbitrage on the difference in living
cost and improve their utility as their pension is set according to earnings in the place of
origin where living cost is higher. This implies that the negative impact of a push factor
in the origin (i.e. higher living cost) will have a positive opposite impact in the
destination (i.e. lower living cost) as the pull factor (Bogue, 1969).
From the market perspective, the decision on relocation can be described as the
outcome of utility maximization. Both initiators (i.e. those who take an active role to
seek opportunities of improvement) and reactors (i.e. those who move as a response to
changes) would consider the trade-offs between various costs and benefits regardless of
whether they are attracted by the physical or socio-economic elements (Maher &
Stimson, 1994; Balchin et al., 1995). Hoang and Wakely (2000) criticize the market
approach for its over-reliance on physical and measurable variables, which may undergo
fundamental changes over time, thus undermining the validity of the arguments so
established. However, the weighing between costs and benefits is inevitable in the
decision process.
Pang’s study (1993, 1994) of the Pacific Asian region established the dependence of
emigration upon a country’s development status. She argued that the net outflow
of workers might increase in the early stage of economic take-off as connections in trade
and information with overseas countries expanded. The flow might, however, slow down
as the domestic economy became more developed, reducing the incentive to emigrate.
This view is also consistent with the experience in the OECD countries as discussed by
Teitelbaum (1993).
Stress threshold and inertia. The ‘stress-threshold’ approach, which suggests that
aspirations on relocation take shape when dissatisfaction on housing and neighbourhood
reaches a certain level, provides another perspective to explain relocation
(Speare, 1974; Varady, 1980). Brown and Moore (1970) argue that the search
for another residence could be triggered by the existence of a stressor when aspirations
and achievements of residential satisfaction are out of congruence owing to, for
instance, changes in relevant parameters (e.g. household size, income or workplace
location). The concepts of aspirations, needs and stress can be integrated to emphasize
the difference between experienced and aspired ‘place utilities’ as the driving force
that leads the household to consider relocation (Brummell, 1979). However, the fact
that a household staying in its present location does not always imply that the situation is
in equilibrium.
The probability inertia model (Huff & Clark, 1978) states that dissatisfaction due to
disequilibrium will increase but at a decreasing rate over time, which may be offset by the
inertia that deters households from moving. In fact, a household may be in disequilibrium
but it chooses not to adjust when the adjustment cost is too high relative to the expected
benefits. Therefore, when a household has aspirations on relocation, then the expected
benefits from such a move must at least compensate the costs involved so that the resulting
net gain would improve its utility (Venti & Wise, 1984). Even though the utility
maximization exercise is an ongoing process throughout the lifetime of the household
(Nordvik, 2001), adjustment for housing disequilibrium through relocation may not take
place because improvement activity may restore housing equilibrium (Goodman, 1976;
Littlewood & Munro, 1997).
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R. L. H. Chiu & M. H. C. Ho
Tenure mode. The costs involved in adjusting for housing disequilibrium through
relocation depend on the household’s tenure mode and the type of housing it occupies.
Renters and owners face different costs in relocation. Both groups must bear the moving
cost, but owners pay extra costs compared with renters. The majority of owners would sell
their existing home when they move to the destination, which involves expenses like real
estate brokerage fees and legal fees. For a given level of expected benefits associated with
relocation, renters are more likely to generate net gain and hence are more mobile
compared with owners when the former face lower relocation costs than the latter
(Shelton, 1968). Given the higher transaction cost involved in relocation for owners,
mistakes are also more costly to owners than renters. Therefore, owners would be more
cautious to prevent mistakes and they tend to pay closer attention to all aspects in the
search for a new home that inevitably translates into higher search cost. Better information
reduces the likelihood of making mistakes, which could save unnecessary costs in
relocation and improve expected utility (Smith et al., 1979).
Lifestyle. Long-distance relocation may alter a household’s consumption bundle if the
quality and availability of certain consumer goods in the destination vary from those of the
origin, which in turn affect the expected gains from relocation and hence relocation
decision. When higher-income households move from higher to lower living standard
areas, they may enjoy lower living cost, but it comes at the expense of giving up or paying
substantially more on certain luxurious items. The move from higher- to lower-income
area may thus mean the downgrading of the lifestyle of the higher-income households. In
fact, these higher-income households are capable and more willing to move to even higher
living standard areas in order to upgrade their lifestyle.
In contrast to the higher-income households, the lower income may not suffer as much
when moving from higher to lower living standard area because the luxurious items are not
in their consumption bundle anyway. That is, lower-income households can enjoy lower
living cost from relocation without sacrificing too much quality or variety of consumer
goods. Therefore, higher-income households are less likely to relocate from higher
(e.g. Hong Kong) to lower living standard area (e.g. mainland China). This may be the
reason why Chen and Coulson (2002) found that attributes of the quality of urban life had
little explanatory power for low-income job-seeking migrants in Chinese cities.
Stimson and Minnery (1998) find that lifestyle factors have predominant influence on
long-distance migration to the Gold Coast in Australia’s ‘sun-belt’. The emergence of
lifestyle with strong environmental and recreation contents presents an alternative
explanation for relocation that challenges the mainstream residential location theory
discussed in the literature (e.g. Lawrence, 1998). The challenge lies in the qualitative
benefit of relocation, in the form of better living environment or higher quality of life,
attainable for the same housing price and living cost (i.e. initiators enticed by the physical
or locational attractions) (Rogerson, 1999). More specifically, the decision on household
location is related to recreation demand (Colwell et al., 2002), but efficient sorting of such
locations is not guaranteed (Hoyt & Rosenthal, 1997). For instance, a residential
development with a golf course may provide attractive scenery, but it is not a perfect
match for non-golfers.
Socio-cultural factors. The non-market approach that emphasizes the importance of
socio-cultural issues (e.g. human relationships) has become an appealing alternative.
Cross-Border Migration of Hong Kong Residents
311
Cultural, social and linguistic differences would deter relocation (Faini & Venturini,
1993). This is why immigrants from the same country tend to cluster so that they could
accumulate and benefit from the common social capital defined as ‘trust, norms and
networks’ (Putman, 1993; Schiff, 1996). Sometimes even though the relocation decisions
might be determined at the household level, one of the family members may pioneer, and
the chains of migration of other family members may follow at later stages (Stark, 1991;
Stalker, 1995).
Since relocation is a decision that involves the consideration of numerous factors, the
neoclassical economic models, which attempt to explain the phenomenon through uneven
economic growth, can be inadequate (Findlay et al., 2000). An example is their failure to
explain why there were so many emigrations out of the fast-growing Asian dragon
economies in the late 1980s to economies which were not necessarily better, such as the
USA and Australia at the time. In a case study of Singapore, it was found that social factors
like a more open social environment and a more relaxed lifestyle are useful to supplement
the inadequacy of the neoclassical economic models (Low, 1994).
The large-scale emigration flow from Hong Kong before 1997 was nonetheless
unique among the Asian economies. Skeldon (1990) described such emigration as a
‘brain drain’ caused by political factors rather than economic consideration, with the
middle class, raised and blossomed in a free market economy setting, trying to avoid
the imposition of central planning by communist China (Skeldon, 1994). Wong (1992)
warned that such a scale and nature of emigration might erode the ruling authority,
eventually causing a legitimacy and governability crisis. Despite its uniqueness, Hong
Kong shared one common phenomenon with other Asian dragon economies. That is,
the advancement in technology and the trend in globalization have made emigration
no longer a “definitive cutting off of roots”, but expansions of personal and
commercial networks “to create the foundation of broader social, economic and
political units” (Skeldon, 1990, p.25).
Cross-Border Relocation Decisions
The enhanced growth of cities along international borders is regarded as an important
regional phenomenon in the era of global cities and as a corollary of the marketization of
the transitional economies (Herzog, 1991; Wu, 1998). The enhanced movement of
population, industry and capital to international boundary regions in some places, notably
Western Europe and the USA-Mexico border region, “reflects a pattern of gradual
integration of border territory into the financial and economic circuitry of the global
political-economic system” (Herzog, 1991, p. 520). In these border regions, there are
socio-economic and cultural exchanges and integration between settlements on either side
of the border, which are reflected in, for instance, the circuitry of border commuter
workers, the spatial-economic ties of assembly plant infrastructure, and the cross-border
commerce and recreation activities. In fact, these regions are created by transnational
economic and social forces. An example is the USA-Mexico transfrontier metropolis,
which is argued by Herzog (1991) as a by-product of First World-Third World economic
integration.
Inevitably, the border zones have been destinations of domestic and international
migrant workers and commute workers who are attracted by the economic
opportunities, notably employment. Generally, a large number of workers would
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R. L. H. Chiu & M. H. C. Ho
cross the border daily to work in the more developed nations. Sometimes workers
would use the border zone as jumping-off points to migrate to the developed
neighbouring country, or as a home base for return by deportation, medical
emergency or other hardship. Herzog (1991) argues that the border commuters are a
hybrid form of migrant workers. Unlike international migrants, border commuters over
the USA and Mexico did not leave their country of origin, with or without their
families, to live and work in the neighbouring country. Yet they are different from
national urban commuters because they travelled to work everyday, crossing an
international boundary. In contrast, differentials in living costs and prices, including
those of housing, may attract residents of the developed country to move or to
purchase second homes in the less developed neighbour, as in the case of the Hong
Kong-mainland China nexus (Business and Professionals Federation of Hong Kong,
2002; Smart, 2003).
However, cross-border movements are not without restrictions. One barrier is the border
control, which could be stringent in the case where deliberate effort is made to maintain
wage differentials when there are significant differences in the levels of economic
development (Wu, 1998). Another barrier is the failure of the border zone to create a safe
and vibrant environment attractive to the targeted households, as in the case of the
Singapore-Indonesian border zone (Grundy-Warr et al., 1999).
The factors leading to or limiting cross-border migration discussed above are not
different from those generally affecting international migration. What is unique is perhaps
the possibility to maintain strong socio-cultural ties in cross-border movement, thus
mitigating the significance of the socio-cultural barriers. Due to the geographical
proximity, drastic cut-off from the social network of the place of origin can be avoided.
In the longer developed border regions, such as the Mexico-USA border, a fused
transnational settlement space, characterized by common daily activity systems and
shared product and labour market, could even been established (Herzog, 1991). In the case
of Hong Kong and mainland China, the socio-cultural barriers are even less significant as
the two places have a common socio-cultural origin and the familial connections have
been strong despite the political separation since 1842.
The discussion above provides a theoretical context to cross-border housing in two
dimensions. First, it discusses the nature and attributes of long-distance and shortdistance residential relocation, pointing out the determinants of relocation decisions,
which include housing disequilibrium, job-market prospects, tenure mode, and housing
quality in terms of utility maximization, as well as inertia, life-course and style, and
socio-cultural factors. Reasons for relocation can be divided into the physical
environmental factors and socio-economic reasons, while the households planning
such a move can be classified as initiators and reactors according to their motives.
Second, this section distinguishes the determinants of cross-border movements,
pointing out that socio-cultural barriers are of less significance. Regardless of all these
distinctions on attractions and motives, the cross-border relocation decision of Hong
Kong residents is voluntary, although government policy on border control, portability
of welfare and subsidies may impose constraints. However, as the Hong Kong
government has no policy on cross-border relocation, and the relocation is marketdriven, the logit model based on utility maximization can be applied. The analysis of
the Hong Kong case will nonetheless begin with examining the general situation of
the cross-border movements.
Cross-Border Migration of Hong Kong Residents
313
Cross-Border Movement: Hong Kong and Mainland China
The intense cross-border interaction between Hong Kong and mainland China can be
reflected by the number of cross-border passenger trips, which stood at 333 000 per day in
2001, an increase of 17 per cent from 1999 (Planning Department, 2001). Although
business and tourist trips are allowed on application, to uphold the principle of ‘One
Country, Two Systems’, China has strict emigration policy, restricting 150 immigrants to
Hong Kong per day. In contrast, residents of Hong Kong are free to move in and out of
China. The initial movement was, however, mainly short trips for tourist, social and
business purposes. In the early 1990s, cross-border purchase of a second home became
popular, partially due to the spillover effect of the over-heated housing market in Hong
Kong. In recent years, the trend of permanent relocation to mainland China, particularly to
cities nearby Hong Kong, seemed to take shape. The results of the 2001 population census
showed that 54 173 Hong Kong residents who worked in the mainland had already taken
up residence there (Census and Statistics Department, 2001a). The markedly improved
quality and design of dwellings in some parts of China closed in on or even surpassed those
of Hong Kong, the substantial price differentials, the less congested environment, the low
living costs and the abundant supply of good quality housing in the nearby cities, pose the
pull factors enticing households in Hong Kong to either buy second homes or to relocate
the residence altogether in the mainland. Such relocation, in contrast to emigrating farther
afield, permits the continuation of strong ties, including employment, with Hong Kong.
Therefore, the choice set for potential residential locations of the Hong Kong people began
to include cross-border options.
A number of small surveys have been conducted by developers and research institutes to
gauge the trend of cross-border housing consumption by the residents of Hong Kong (e.g.
Hong Kong Council of Social Services, 1999; Hong Kong-China Relation Strategic
Development Research Fund, 2001; Business and Professionals Federation of Hong Kong,
2002; Hong Kong Policy Research Institute, 2002; The University of Hong Kong Public
Opinion Program, 2002; Yeung & Wong, 2002). The general findings were that the trend
was still insignificant but it was growing. More comprehensive understanding of the trend
can be sourced by the two citywide surveys conducted by the Census and Statistics
Department and the Planning Department of the government of HKSAR in 2001 and 2003,
respectively. A random sample of about 10 000 households were selected for face-to-face
interviews in both surveys, and based on information collected, the situation of the whole
population was inferred (Census and Statistics Department, 2001b, 2004). The 2003
survey found that about 61 800 residents (about 1.1 per cent) had taken up residence in
mainland China. This was a 50 per cent increase compared with the observation in 2001,
which stood at 41 300. In other words, a net flow of 20 500 Hong Kong residents had
emigrated to mainland China between 2001 and 2003. The main reason for taking up
residence in China was employment related (70 per cent), followed by retirement purposes
(11 per cent) and family reunion (8 per cent). Compared with the results of the 2001
survey, the reasons of family reunion, having relatives in the mainland and better living
environment became less important (Table 1).
Table 2 shows that the more favoured places of destination have also shifted, with
bigger cities (Guangzhou and Shenzhen) gaining more popularity, and vice versa for the
smaller ones (Dongguan and other locations within the Guangdong province). This might
be due to the increasing importance of employment as the reason for emigration. It is
314
R. L. H. Chiu & M. H. C. Ho
Table 1. Reasons of Hong Kong residents in taking up residence in mainland Chinaa
2001
2003
Required
by work
For retirementb
32 008
(77.5)
42 951
(69.5)
–
6613
(10.7)
Lower living
Reunion with standard/lower
spouse/children
price level
7930
(19.2)
5068
(8.2)
702
(1.7)
3028
(4.9)
Having relatives
(other than
spouse/children)
Better living
environment
7930
(19.2)
2287
(3.7)
7930
(19.2)
1730
(2.8)
a
Multiple answers were allowed.
‘For retirement’ as a reason for taking up residence in mainland China had not been included in the 2001
survey.
c
The number of counts under each category was estimated according to percentages (as shown in
parentheses) reported in Planning Department (2004).
Source: Census and Statistics Department (2001b, 2004).
b
therefore not surprising that 75 per cent of the emigrants in 2003 were economically
active. It is also notable that the proportion of the emigrants with monthly personal income
of HK$19 999 or below had increased from 54 to 88 per cent between 2001 and 2003.
Likewise, emigrants with professional or associate professional skills had also increased
from 7 to 32 per cent in 2003 (Table 3). Thus, the mainland has become much more
attractive to skilled labourers.
Based on the survey results, it was projected that 277 200 Hong Kong residents owned
properties in mainland China in 2003; and that 56 per cent of these people were male with
the median age of 48. Most of them, if employed, were managers and administrators (28
per cent) and professionals and associate professionals (17 per cent). The survey also
found that more Hong Kong residents owned or rented properties in the mainland in 2003
than in 2001, with the former increasing from 212 100 to 277 200, and the latter from 29
200 to 35 900 (Table 4). In other words, a total of 65 100 persons, some of whom might be
joint-owners, had purchased residential properties in China between 2001 and 2003, with
an annual average of 32 550. What is notable is that in both years, as high as 41 per cent of
households who owned properties in China lived in subsidized housing in Hong Kong.
In terms of the characteristics of residential properties owned or rented by Hong Kong
residents, the number of these properties had increased by 10 per cent, growing from 218
000 in 2001 to 239 200 in 2003. About 90 per cent of these properties were owned
Table 2. Locations of accommodation of cross-border emigrants from Hong Kong
2001
2003
a
Provinces other
than Guangdong
Other locations
within Guangdong
Dongguan
Guangzhou
Shenzhen
Total
2646
(6.4)
14 200
(23.0)
11 493
(27.8)
6668
(10.8)
13 849
(33.5)
9569
(15.5)
5168
(12.5)
15 558
(25.2)
8144
(19.7)
15 805
(25.6)
41 300
(99.9)
61 800
(100.1)
The number of counts under each category was estimated according to percentages (as shown
in parentheses) reported in Planning Department (2004).
b
The sum of individual items may not add up to 100 per cent owing to rounding.
Source: Planning Department (2004).
Cross-Border Migration of Hong Kong Residents
315
Table 3. Occupations of cross-border emigrants from Hong Kong
2001
2003
Managers and
administrators
Professionals
and associate
professionals
Service
workers and
shop sales
workers
25 673
(62.1)
26 079
(42.2)
2936
(7.1)
19 900
(32.2)
2811
(6.8)
2843
(4.6)
Clerks
Craft
and
related
workers
Others
Total
1075
(2.6)
3399
(5.5)
8144
(19.7)
4388
(7.1)
661
(1.6)
5191
(8.4)
41 300
(99.9)
61 800
(100.0)
a
The number of counts under each category was estimated according to percentages (as shown
in parentheses) reported in Planning Department (2004).
b
The sum of individual items may not add up to 100 per cent owing to rounding.
Source: Planning Department (2004).
properties and they increased from 189 000 to 215 400 between 2001 and 2003. The
average annual increase was thus 13 200, which was equivalent to almost half of the new
housing supply in Hong Kong. A majority of these owned properties (89 per cent) were
within Guangdong, the province adjacent to Hong Kong. Within the Guangdong province,
Dongguan and Shenzhen, the two cities closest to Hong Kong and linked by the railway,
were the most popular places (Table 5). Among the owned properties, 67 per cent were
flats in multi-storey buildings and the rest were houses. About 62 per cent were selfoccupied, and the median internal floor area was 900 square feet.
The survey also asked the intention of taking up residence in the mainland in the next 10
years. Projecting from the result, it was expected that about 39 000 households, or 1.8 per
cent of all households, intended to do so. About half (20 100 households) intended to move
in the next 5 years. While these numbers may not be alarming, the changes are as these
figures had increased by about 56 to 53 per cent, respectively, between 2002 and 2003.
However, among the households that intended to move, there were proportionately less
one-person households (36 per cent) and two-person households (28 per cent) in 2003
when compared with the same in 2001 (45 and 34 per cent, respectively). This shows that
more nucleus families with children were willing to take up residence in China, possibly
reflecting that education facilities were of a lesser concern as improvements had been
made.
The number of individuals who intended to move to mainland China however had
dropped from 172 000 to 161 100 (3 per cent of all Hong Kong residents) between 2001
and 2003. With a medium age of 46, about 72 per cent of those who intended to move were
Table 4. Households/residents in Hong Kong owning or renting residential properties in mainland
China
2001
2003
Owned
residential
properties
(persons)
Rented
residential
properties
(persons)
Owned
residential
properties
(households)
Rented
residential
properties
(households)
212 100
277 200
29 200
35 900
163 900
193 100
26 300
23 300
Source: Planning Department (2004).
316
R. L. H. Chiu & M. H. C. Ho
Table 5. Locations of residential properties in mainland China owned by Hong Kong residents
2001
2003
Provinces
other
than
Guangdong
Other
locations
within
Guangdong
Guangzhou
Shenzhen
Dongguan
Total
22 680
(12.0)
22 832
(10.6)
52 731
(27.9)
65 912
(30.6)
31 185
(16.5)
35 326
(16.4)
37 233
(29.7)
43 511
(20.2)
45 171
(23.9)
47 819
(22.2)
189 000
(100.0)
215 400
(100.0)
a
The number of counts under each category was estimated according to percentages (as shown in
parentheses) reported in Planning Department (2004).
Source: Planning Department (2004).
married and over 70 per cent attained secondary education or above. A majority of them
(64 per cent) had a personal income of below HK$10 000 and the median monthly income
had dropped from HK$9000 to HK$6800 between 2001 and 2003. Further, as high as 31
per cent were economically inactive in 2003. The three most commonly cited reasons for
the migration were: low cost of living (39 per cent); retirement (28 per cent); and better
living environment (25 per cent). Unlike those who had already moved to China,
employment-related reasons were not as commonly cited, reflecting that migration due to
work reasons was less voluntary. It is therefore not surprising that when those who (96 per
cent) had no intention to emigrate to mainland China were asked the situation under which
they would consider moving across the border, the most common answer was employment
opportunities.
The survey also found that the three major reasons for not intending to take up residence
in the mainland were: having residential property in Hong Kong (34 per cent), difficult to
adapt to/unfamiliar with the environment in the mainland (34 per cent), and having a job in
Hong Kong (28 per cent). In contrast, the push factors cited were: lack of employment
opportunity, poor economic situation and poor public order. Thus, economic reasons and
home ownership loom large in the decision of moving across the border.
Concerning the impact of the migration on the property market of Hong Kong, 34 per
cent of the owner-occupier households who intended to move to the mainland in the next
10 years would sell their present accommodation while 30 per cent would retain them for
self-occupation. Thus, a total of 13 566 housing units would be released to the market,
averaging 1357 per year, which will be rather insignificant. The impact on the housing
market of China will be greater, however. Although not as many as in 2001 (275 100
persons), there were 213 900 Hong Kong residents who intended to own/rent residential
properties in the mainland in the next 10 years, averaging 21 390 per year. 57 per cent of
these purchases were intended for holiday purposes while only 35 per cent for permanent
residence.
The above preliminary analysis of the survey results highlights the major features and
the reasons of cross-border relocation by the people of Hong Kong. It is shown that
decisions on cross-border relocation were related to differentials in both the physical and
the socio-economic environments of the origin and the destination places, notably
employment prospect and cost of living, with the latter particularly significant for the
retirees. Overall, the trend of Hong Kong residents consuming housing across the border
Cross-Border Migration of Hong Kong Residents
317
had been intensifying. The consumption took two forms: either as second homes or for
self-use, with the former dominating. Still, the trend of cross-border relocation, which was
increasingly induced by employment reasons, had been growing. The migrants were also
less dominated by one- or two-person households showing that conditions across the
border had become more attractive to nucleus families.
While the two surveys are useful for projecting the trends of cross-border housing
consumption, it needs to be noted that since the surveys were conducted within the
boundary of Hong Kong, it did not reach those who had already taken up residence in the
mainland and no longer reside in Hong Kong. Therefore, the information related to crossborder housing consumption behaviour was probed from other household members;
hence, the validity and reliability might have been compromised. This means that the
surveys are useful only for analysing present aspirations on cross-border relocation, but
theoretically less useful for identifying the real reasons which triggered the final decision
to move. Nonetheless, the major reasons for relocation identified by the surveys complied
with those identified by the authors (better business and employment opportunities and
lower costs of living) in the interviews with the migrants in Nansha (Qifu Xincun)
Zhongshan (Agile Garden) in March 2003 and July 2003, respectively.
To further probe into the migration phenomenon and trends, we could apply appropriate
theoretical and methodological tools. Since the raw data-set of the 2001 survey is available
for academic use, the logit model based on utility maximization is applied to further
analyse and project the factors and socio-economic groups who are more likely to relocate
to the mainland.
Empirical Analysis
Logit Model and Relocation Decision
The utility maximization model hypothesizes that rational households always choose a
feasible and attainable consumption bundle in their choice set that yields the highest
level of satisfaction. The consumption bundle includes tangible items (e.g. food and
medical care) as well as intangible items (e.g. charity donation and neighbourhood
quality). The quantity of housing services that a particular housing unit provides depends
not only on physical attributes (e.g. space, number of bedrooms and bathrooms), but also
intangible attributes (e.g. location and view). That is, a large house in a high-income
neighbourhood would yield different levels of housing services compared with a house
with identical physical attributes but located in a low-income neighbourhood with high
crime rate. The preference of a household would influence its location decision in the
way that its consumption pattern would determine the locational choice. In fact, some
items in the consumption bundle are location specific (e.g. schools in certain school
districts or houses with panoramic sea view). Therefore, location is a unique item in the
consumption bundle that households may pay special attention to in the decision-making
process.
The purpose of the logit model is to explain the decision-making process of a particular
household and to express it in terms of the probability that a particular household would
choose certain alternatives available in its choice set. Each household is assumed to
maximize its satisfaction, expressed in utility level, given the alternatives available in its
choice set with respect to locations and the associated consumption bundle such that the
318
R. L. H. Chiu & M. H. C. Ho
utility of a particular household, say the nth household, choosing a particular location, say
the ith location is
U in ¼ VðX in ; di Þ þ 1in
ð1Þ
where the utility function Uin is decomposed into the known portion, V(Xin, di), where Xin
is a vector and consists of observed characteristics of the nth household and the vector of
parameters di related to the ith location, and the unknown portion, 1in. This represents the
utility that the household would get in choosing the ith location and the associated
consumption bundle Xin is V(Xin, di). However, the researcher cannot read the mind of the
household completely. Thus there is always something that the researcher does not know
about the household, which is captured in the unknown portion 1in. The probability that the
nth household would choose the ith location and the associated consumption bundle that
yields highest utility can be written as
Pin ¼
eX n b
:
1 þ eX n b
ð2Þ
If the ith location is the cross-border alternative, then the logit model would estimate the
probability of having a cross-border relocation plan given the household characteristics
and its aspirations on cross-border relocation (see Appendix for details).
Variables
A total of 9609 cases were used in the logit estimation. The dependent variable takes on
the value of one if the household has a plan to relocate across the border in the next 10
years and zero otherwise. The independent variables include observed characteristics of
the household head (e.g. age, gender and education attainment), tenure mode, existing
location, household income and ties with the mainland (Table 6).
The age of the household head has implications on the consumption and the investment
pattern according to the life-cycle theory (Artle & Varaiya, 1978). AGE3055 is specified
to capture the impact of the household head’s age between 30 and 55 on cross-border
relocation. The households with a male head, MHEAD, may be more mobile relative to
their female counterparts. Long-distance moves are usually job-related in nature, which is
closely related to the educational attainment of the household head. HIED is specified to
indicate that the household head has at least a university degree.
PRH and PUBOWN represent households residing in public rental housing and
subsidized ownership flats, which could indicate if households in the public housing sector
have different propensity of cross-border relocation from their private sector counterparts.
Also, the present location of the residence can be used as a proxy of dissatisfaction that
may trigger cross-border relocation. Therefore, KL is specified to examine if residents in
Kowloon have different aspirations on cross-border relocation relative to those on Hong
Kong Island and New Territories (Figure 2).
MEMPRC is specified to examine the impact of at least one household member who has
already relocated across the border on chain migration. One of the pre-requisites before a
cross-border relocation takes place is accommodation arrangement and DWPRC2
indicates a household has at least two residential properties across the border.
Lower-income households are more focused on living cost while higher-income
households are more concerned with their lifestyle. Since households with different
Cross-Border Migration of Hong Kong Residents
319
Table 6. Summary statistics of variables used in the logit estimation
Number of cases
AGE3055
MHEAD
HIED
PRH
PUBOWN
KL
MEMPRC
DWPRC2
INLT10K
INGT50K
No plan to move
Plan to move
Overall
9495
0.64
0.59
0.14
0.32
0.20
0.31
0.02
0.01
0.25
0.10
114
0.71
0.72
0.25
0.24
0.11
0.42
0.09
0.06
0.36
0.08
9609
0.64
0.60
0.14
0.32
0.20
0.31
0.02
0.01
0.26
0.10
Notes: The meanings of the variables are:
AGE3055 age 30–55
MHEAD households with male heads
HIED household heads with university degrees or above
PRH residents of public housing
PUBOWN residents of subsidized ownership flats
KL residents of Kowloon
MEMPRC households with member(s) moved to the mainland
DWPRC2 households owning at lease two residential properties in the mainland
INLT10K households with monthly income below HK$10 000
INGT50K households with monthly income above HK$50 000.
income levels face different costs and benefits resulting from the cross-border relocation
decision, INLT10K and INGT50K are specified to examine the impact of income on the
cross-border relocation propensity of the lower- and higher-income groups with monthly
household income below $10 000 and above $50 000, respectively. Summary statistics of
the variables used in the estimation are listed in Table 6.
Estimation Results
Estimation results are listed in Table 7. Pseudo-R 2 (Hauser, 1978; Amemiya, 1981) and
the percentage of correct prediction are calculated from the estimation results. The
pseudo-R 2 is 0.91, which implies that the specification fits the data well. Using the
estimation results to make a prediction and compared with the actual data, the specification
correctly predicts 98.8 per cent of the cases in the sample. Almost all coefficient estimates
are significant at the 1 per cent level except the income of higher-income households
(INGT50K), households located in Kowloon (KL) and households residing in subsidized
ownership flats (PUBOWN), which are significant at the 5 per cent level.
The coefficient estimate for those households with their head in the age group between
30 and 55 is positive, which means these households are more likely to relocate across the
border than others either due to job market prospects or retirement plan. The positive
impact of a male head confirms that households with a male head were more likely to
relocate across the border than those with a female head. Households with heads who
received higher education attainments were relatively more mobile. A positive
relationship between labour mobility and cross-border relocation propensity existed.
320
R. L. H. Chiu & M. H. C. Ho
Figure 2. Major districts in Hong Kong
Households in the public rental sector were less likely to have a cross-border
relocation plan as indicated by the negative coefficient estimate due to inefficient
subsidy policy (Ho, 1994). In fact, Wong and Liu (1988) found that the public housing
tenants were unwilling to adjust housing consumption. Around 13 per cent of the
families in public rental housing owned a private residential flat (Leung, 1999); these
public rental tenants chose to stay in the relatively inferior public housing units due to
distorted relative housing costs. Although the government has determined to phase out
the build-for-sale schemes (Housing, Planning and Lands, 2002), 60 per cent of the
nearly 310 000 subsidized ownership flats had been sold to public rental tenants. This
implies public rental housing tenants and the majority of subsidized sale flat owners
share similar socio-economic characteristics except their tenure modes. This means
switching the tenure mode from rent to own while remaining in the public sector would
not alter cross-border relocation propensity. To a certain extent, public housing reduces
cross-border mobility.
Households in Kowloon had a higher cross-border relocation propensity than those on
Hong Kong Island and New Territories as implied by the positive coefficient estimate.
These households might have been drawn by the physical quality across the border such as
the living environment and housing quality when the five most densely populated districts
were all situated in Kowloon.
Cross-Border Migration of Hong Kong Residents
321
Table 7. Estimation results (t statistics in parentheses)
b^k
Constant
AGE3055
MHEAD
HIED
PRH
PUBOWN
KL
MEMPRC
DWPRC2
INLT10K
INGT50K
25.6024
(217.9074)
0.6089
(2.7287)
0.6105
(2.8490)
0.9513
(3.8368)
20.6328
(22.6514)
20.7548
(22.3751)
0.4407
(2.2679)
1.4286
(3.9687)
1.7012
(3.9468)
0.8944
(3.9527)
20.8809
(22.2980)
›Pin =›X nk
0.0070
0.0070
0.0110
2 0.0073
2 0.0087
0.0051
0.0165
0.0196
0.0103
2 0.0102
Notes: The meanings of the variables are:
AGE3055 age 30–55
MHEAD households with male heads
HIED household heads with university degrees or above
PRH residents of public housing
PUBOWN residents of subsidized ownership flats
KL residents of Kowloon
MEMPRC households with member(s) moved to the mainland
DWPRC2 households owning at lease two residential properties in the mainland
INLT10Khouseholds with monthly income below HK$10 000
INGT50Khouseholds with monthly income above HK$50 000.
When someone in the household had already moved across the border, the
remaining member(s) may follow the first-mover and trigger the chain migration for
family reunion purpose. This human factor would undoubtedly raise the household’s
cross-border relocation propensity as indicated by the positive estimated coefficient.
Also, when a household has at least two residential properties across the border, then
the major obstacle of relocation (i.e. accommodation arrangement) is unlikely to
be a binding constraint. This is a strong signal about a household’s intention
and readiness for cross-border relocation, as reflected by the positive coefficient
estimates.
The positive coefficient estimate of the lower-income group implies that the gains from
living cost arbitrage play a significant role as the pull factor. The negative coefficient
estimate of the higher-income group meant that the consumption pattern and lifestyle
enjoyed by this higher-income group were unavailable across the border. Hence, they are
unwilling to trade quality of their consumption bundle and lifestyle for lower living cost.
322
R. L. H. Chiu & M. H. C. Ho
The last column of Table 7 lists the impacts of changes in the independent variables on
cross-border relocation propensity. The top two positive influences pertain to the ties
either in the form of members in the household already relocated across the border
(i.e. human factor) or having at least two residential properties in the mainland (i.e.
accommodation factor). This means ties with the destination were effective indicators of
relocation due to chain migration and readiness (Kan, 1999). The dominant negative
factors were, respectively, the concerns of the higher-income households about
consumption pattern and lifestyle, and type of dwelling being public housing. The
former confirms the importance of social factors such as lifestyle and social networks on
cross-border relocation. The latter points out the fact that subsidized housing induced
friction on mobility.
Conclusions
Although since China launched the Open Door Policy in 1979, economic connections
between Hong Kong and China have been continuously intensified and diversified, the
political boundary between the two places has deterred bilateral free flow of people, goods
and capital. This situation continues to persist even after the return of Hong Kong’s
sovereignty to the mainland. Today, the differentials between the two places, for instance,
living costs, housing prices and living standards, still prevail, albeit reduced, partly
because border control has prevented complete factor price equalization. Cross-border
home purchase and relocation by Hong Kong residents reflect their market decisions to
take advantage of the lower housing price and living costs. This trend was strengthened in
the past decade partly because of the spillover effect of the booming property market of
Hong Kong in the early 1990s, and partly because dwellings in the mainland are gradually
reaching standards attractive to Hong Kong consumers.
The cross-border relocation of Hong Kong residents represents a special form of
residential move. It could neither be regarded as long-distance nor short-distance
relocation. The relocation involves movement over a political border and into a place of
different institutional and legal set-up. It is therefore dissimilar to intra-urban migration.
The common ethnic origin and kinship network nonetheless differentiate this type of
cross-border relocation from international migration. Further, the short distance between
Hong Kong and southern Guangdong permits movers to retain connections in the former,
even to the extent of commuting to work or keeping two homes across the border. The
possibility of frequent commuting is thus important in this type of residential relocation, as
reflected by the higher preference for cities that were closer to Hong Kong.
Although most of the major factors affecting residential relocation discussed in the
literature, such as employment opportunities and cost of living, were found to be relevant
to cross-border relocation, there were distinctive features. First, as afore-discussed, the
more preferred destinations of relocation were those closer to the place of origin because
of the intention to maintain strong links. This may not necessarily be the case for other
types of residential relocation. Second, the socio-economic variables were of particular
significance in relocation decisions. Economic status was found to be an important factor
by the logit estimation not so much because of income level per se but because of the
lifestyles associated with income levels. When the cross-border relocation involves a
move from a more developed to a less developed economy, the bundle of consumer
services available becomes a concern of the more affordable income groups.
Cross-Border Migration of Hong Kong Residents
323
Third, the housing variable constituted another distinctive factor. Again it is not because
of the type of accommodation per se, but because of the subsidies embedded in specific
types of housing. The availability and the scale of housing subsidy to the lower-income
group would affect their desire to make use of the price differentials across the border to
improve their housing conditions. If housing subsidy is provided in the in-kind form
charging low rentals, such as the direct provision of public housing in Hong Kong, the
subsidies can be easily abused as the survey results show that public housing tenants
tended not to return the dwelling to the government after relocation. The finding that as
high as 41 per cent of the purchasers of cross-border housing lived in subsidized housing
could not be a better illustration. To minimize inefficiency in the public housing sector,
a tighter enforcement of the eligibility and subsidy policy is needed. Therefore, the
housing subsidy policy has an indirect effect on cross-border relocation.
The government survey results and the analysis in this article indicate that the present
cross-border relocation trend has minimal effect on the demands in the private and public
housing sectors. This may, however, be the short-term horizon. The economy of China is
developing fast, including its real estate and consumer industries. In the years ahead,
southern China, the most developed region in the country, may well provide housing
standards and consumer services which are enticing to the higher-income households in
Hong Kong. For the lower-income groups, who are mostly residents in public housing,
their future desire to improve housing conditions through moving up the ‘housing ladder’
in Hong Kong may be stifled by the cheaper cross-border options. With further relaxation
of the border control and the continuous development of cross-border transport links, the
choice set of housing consumers in Hong Kong inevitably expands as there is more fusion
between the two sides of the border. Therefore, it is important to take into account the
stages and the speed of development of the origin and destination of cross-border
relocation when examining its potential impact on local housing markets.
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Appendix
The process of utility maximization implies each household would actively or passively
evaluate its existing location along with the combination of consumption of all
commodities and services in the choice set in order to optimize its satisfaction given the
relevant budget constraint. Suppose each location is associated with a specific bundle of
benefits at a particular cost such that the utility of the nth household choosing the ith
location is
U in ¼ VðX in ; di Þ þ 1in
ðA1Þ
where the utility function Uin is decomposed into V(Xin,di) whose form is assumed known to
the researcher and the unknown portion of the utility function e in, Xin is a vector consisting
of observed characteristics of the nth household and the vector of parameters di related to
the ith location. The nth household would choose the ith location (i.e. cross-border
relocation) over the jth location (i.e. no relocation plan) if U in . U jn . Assuming e in and e jn
are distributed identically and independently in accordance with the Weibull density
functions (Johnson & Kotz, 1970; McFadden, 1974), the probability of the nth household
having a cross-border relocation plan can be expressed as
Pin ¼ probðU in . U jn Þ
¼
eV in
eV in
:
þ eV jn
ðA2Þ
Since there is no choice-specific household information contained in the survey data, the
logit model specified in the empirical estimation uses the same set of regressors for both
choices for each household and hence only one set of parameter estimates is needed.
Pin ¼
eX n b
1 þ eX n b
ðA3Þ
with Xn for Xin, V in ¼ X n di and b ¼ di 2 dj . Suppose Xnk is the variable that indicates the
household has a member in the mainland, dik . djk and bk . 0 such that U i . U j if family
Cross-Border Migration of Hong Kong Residents
327
reunion would yield higher utility. Then, the presence of a particular characteristic would
increase the probability of cross-border relocation if it has a positive coefficient. That is,
the logit model would estimate the probability of having a cross-border relocation plan
given the household characteristics and its aspirations on cross-border relocation. The
probability of the nth household having a cross-border relocation plan observed in the
sample is
Y
Plin
ðA4Þ
i[J in
n
where lin is one if the nth household has a cross-border relocation plan and zero otherwise
in the choice set Jn. If the choice that each household makes is independent of the others,
then the maximum likelihood estimation will solve for the vector b in (A3) that yields the
highest value for the log-likelihood function for a sample with N households
X X
LLðbÞ ¼
l log Pin :
ðA5Þ
n[N
i[J in
n
One advantage of using the logit model is that the derivative of Pin with respect to the
kth explanatory variable of the nth household is simply
›Pin
›V in
¼
ðA6Þ
Pin ð1 2 Pin Þ ¼ bk Pin ð1 2 Pin Þ
›X nk
›X nk
(see Train, 1986 for details).