Midterm Exam

CHARLES CHARIYA ECON 6001

Cross-Border Marriage in Hong Kong

OVERVIEW
In the following paper, we will examine the effect of cross-border marriage on income
levels. The hypothesis being tested is Does being a Hong Kong National, married to a
Chinese mainlander have a relationship to income? Here, the null hypothesis is that
being a cross-border marriage has no effect on income. The analysis is separated into
two parts, (1) identification of the group to be analyzed, and (2) analysis of the
effect of being a HK national with a cross-border marriage on income, controlling for
other indicators such as age and education.
In this exercise, we will be using the 2001 Population Census Sample of Hong Kong.
PART 1 Identification of the model group
The identification of the model group was a non-intuitive exercise since there are a
number of potential variables that might be indicators for cross-border marriage.
First, defining cross-border marriage as marriage between Hong Kong natives and
people in mainland China, we can break this down to
the two components, (a) Hong Kong native and (b)
mainland China person. To determine the first part,
looking at NAT (nationality), we see that of the total
sample size (172,957 records) a large percentage of
the census data are of HK nationality. The BORNPL
shows a different picture, with less than half of the
sample being born in HK. With the differences in the
two variables in mind, it would seem that NAT is a
better indicator for being a HK native, as a person who was born elsewhere, but grew
up in HK would be considered a HK native.
For the second part, determining whether an individual is from mainland China, after
reviewing several other variables, and comparing with expectations of sizes, the group
that was chosen to be analyzed is based on the variable PDIST5YR (District of
Residence 5 years ago) set equal to 41 to indicate if the person is a mainlander.
This makes sense because if the persons residence 5 years ago (ie 1996) was mainland
China, and at the census moment (ie 2001), they were in HK, then it is likely that the
individual is a person that has crossed the border aka a mainlander in HK.
Now, the difficult part of this was the cross tabbing between the (a) and (b). In
this exercise, we used the destring and by, sort functions to compare individuals
within a group. Below is the three-step process used to create the variable
MAINLAND_SPOUSE. This variable indicates that the individual has a spouse from the
mainland:
gen hhno = string(qrno1)+string(qrno2)+string(qrno3)+string(qrno4)+string(hhn)
destring hhno,gen(hhnum)
by hhnum, sort: gen mainland_spouse = pdist5yr[ssn] ==41
Essentially, the first two steps generate a unique indicator to compare individuals
within a household. The third step generates the indicator variable if the
individuals spouse is lived in mainland China 5 years ago. Below are the counts for
the variables created:

HK National
cross
HK
Mainland Mainland
Total National Mainlander Spouse
Spouse
Female 68,201 59,408
2,732
697
552
Male
62,506 58,714
1,656
709
688
Total 130,707 118,122
4,388
1,406
1,240
Some interesting findings here include the relatively large number of female
mainlanders compared to male mainlanders. It also appears that the number of male HK
nationals married to mainlanders is larger that the number of female HK nationals

married to mainlanders by approximately 24.6%. Note that the number of total records
falls from 172,957 to 130,707. This is because there are 40,000 records for
households with no individual characteristics (SSN==0). Additionally, note that there
are 72,737 records where the SSN is 99, which indicates that the individual does not
have a household (either are homeless, or due to a data collection error).
Conclusions from the group identification part of this analysis include that in the
dataset, there are 1240 records that match our criteria of being a HK National married
to a mainland spouse. Please note that this is likely not a complete picture as there
is no determined method of locating HK Nationals that are married to a mainland spouse
if the mainland spouse is not in the dataset that has been collected. This issue
would include nationals that are married to a person who is still living in mainland
China (which is likely a very large number). However, the method we have employed is
strict in the rules determining candidacy, and there is a large number of identified
candidates, so therefore we will proceed to the next step in answering the economic
question related to income.
PART 2 Do HK nationals married to Mainland spouses affect income levels.
In this exercise, we looked at the main variables that include being a HK National,
being a Mainlander, having a mainland spouse, and the interaction term of being a HK
National and having a Mainland Spouse. Running a linear regression on these variables
we find the following:

Log_ppinc
HK National

Regression 1
0.434
(0.010)

Mainlander

Regression 2
0.422
(0.010)
-0.443
(0.022)

Mainland
Spouse
HK National
cross Mainland
Spouse
_Con
r-squared

Regression 3
0.424
(0.010)
-0.390
(0.023
-0.259
(0.032

Regression 4
0.430
(0.010)
-0.4132
(0.023)
0.390
(0.092)
-0.723
(0.097)

9.028
(0.009)
0.030

9.048
(0.009)
0.036

9.049
(0.009)
0.037

9.043
(0.009)
0.038

With this fairly simple set of regressions, we see some interesting results.
Being a HK National has a positive effect of income, being a mainlander has a
negative effect of income (see part 1 for definitions). Having a mainland
spouse (in regression 3) has a additional negative impact on income, but that
impact changes sign when the interaction term of HK National x Mainland Spouse
is introduced.
Clearly, there are other terms that have not yet been included in the above
model, which are likely in the actual regression (under-specification). We
will now include into the model terms which likely effect income, including
gender, age, and education.
The resulting model equation would be:
Log(ppinc) = 5.853 + 0.520(hknational) + 0.228(mainland_spouse)- 0.465 (hkxms)
(0.030) (0.010)
(0.076)
(0.071)
+ 0.022(educn) + 0.338(male) + 0.097(age) 1.03e-3(agesq)
(1.37e-4)
(5.40e-3)
(1.57e-3)
(1.99e-5)
All terms in the above model equation are significant at the 95% confidence
level. Reading the equation would indicate that being a HK National increases
income by 52.0%, having a mainland spouse increases it by 22.8%, being both a
HK National and having a mainland spouse decreases income by 46.5%. Note that

this interaction term is not as large as the previous model since the other
controlling variables are affecting the interaction term, reducing the
magnitude. Males make 33.8% more than women in the sample. Each (approx)
year of education increases income by 2.2%, and each year of age by increases
it by 9.6%. Note also, that the age-squared term is added, showing that
income has a non-linear effect, increasing income to a particular age and then
decreasing income afterwards. Finally, as described several times in class,
ability is probably a more appropriate variable affecting income, but with no
direct measure of ability (or proxy such as IQ), we are using education as an
approximator.
Considering the 5 assumptions for the regression model: (1) linearity, (2)
random sample, (3) exogeneity, (4) homoskadasticity, and (5) nonautocorrelation. The model appears to be linear, and taking the log of the
dependant variable does help to reduce the variance for the outliers in
income. The sample is a census so it should be representative of the entire
population census implies all individuals are surveyed. Exogeneity cannot
be fully answered as we are unable to know what the error term might contain,
and thus how the independent variables might correlate with the error. Adding
the additional control variables should, however reduce any exogenity that we
had comparing the initial model to the revised one. Homoskadasticity was
tested by using robust - the coefficients did not change, and the standard
deviations changed only slightly (values not shown in this paper due to space
restrictions). Finally, Non-autocorrelation, the error should not be
correlated with any individual observations. Please note that the sample
sizes are relatively large therefore using the large sample properties helps
validate many of these assumptions.

50000

ppincom
100000

150000

Income vs. Age, Mainlander==1

50000

ppincom
100000

150000

Income vs. Age, HKxmainland_spouse ==1

20

40

age

60

80

20

40
age

60

80

A further look at the age/income distribution above shows the difference

between the test group and the distribution for mainlanders in general. It
appears that mainlanders in general have a larger income spread at all ages.
This might further the idea that HK nationals who are married to mainlanders
are less wealthy (even when compared to mainlanders in general).
CONCLUSION
Does being a Hong Kong National, married to a Chinese mainlander have a relationship
to income? Based on the findings in this paper, we reject the null hypothesis, even
after controlling for additional variables that directly influence income (age,
education, and gender). In general being a HK National increases income by

52.0%, having a mainland spouse increases it by 22.8%, being both a HK

National and having a mainland spouse decreases income by 46.5%.