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The Dynamics of Informal Employment in Urban China

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  • Deng, Quheng
  • Ma, Xinxin

Abstract

Utilizing the rotating panel data based on the Urban Household Surveys from 2002 to 2007 conducted by National Bureau of Statistics of China , this study investigates the dynamics of informal employment in urban China. It is found that the proportion of informal employment to the total employment increases continuously from 2002 to 2007. Transition rates between the informal and formal employment status indicate the probability of persistence in the informal employment is great. To consider that there may exists spurious state dependence which may overestimate the persistence in informal employment, this study utilizes the random-effects dynamic probit models to address the unobserved heterogeneity problem, and deals with the initial condition problem and the serial correlation of transitory shocks. Based on these regression results, this study disentangles the genuine from spurious state dependence. It is found that the genuine state dependence accounts for the majority of the persistence in informal employment. Genuine state dependence patterns for various subgroups are also examined.

Suggested Citation

  • Deng, Quheng & Ma, Xinxin, 2018. "The Dynamics of Informal Employment in Urban China," CEI Working Paper Series 2018-3, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2018-3
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29246/wp2018-3.pdf
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    References listed on IDEAS

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    Keywords

    dynamics; informal employment; persistence; spurious state dependence; genuine state dependence;
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