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Self-Employment in China: Are Rural Migrant Workers and Urban Residents Alike?

Author

Listed:
  • Cui, Yuling

    () (Macquarie University, Sydney)

  • Nahm, Daehoon

    () (Macquarie University, Sydney)

  • Tani, Massimiliano

    () (University of New South Wales)

Abstract

This paper studies differences in the motivation to be self-employed between rural migrants and urban residents in modern China. Estimates of the wage differential between self-employment and paid-employment obtained through a three-stage methodology using the 2002 China Household Income Project (CHIP), reveal that rural migrants become self-employed to avoid low-pay city jobs, enhancing their odds of economic assimilation. Conversely, urban residents become entrepreneurs to move out of unemployment. The empirical analysis confirms that self-employment also attracts married individuals and those in good health, while it negatively relates to high educational attainment. The decomposition of hourly wage differences between pairs (by type of employment and residence status) shows that higher hourly wages of paid and self-employed urbanites over migrants predominantly arise through differences in coefficients (i.e. "discrimination") while those between self- and paid employment among urbanites are mostly due to differences in individual characteristics. Discrimination overwhelmingly accounts for hourly wage differences between self- and paid employment among rural immigrants. We interpret the relevant effect of discrimination in 2002 in urban labour markets as a sign of the institutional barriers associated with the Hukou system.

Suggested Citation

  • Cui, Yuling & Nahm, Daehoon & Tani, Massimiliano, 2013. "Self-Employment in China: Are Rural Migrant Workers and Urban Residents Alike?," IZA Discussion Papers 7191, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7191
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    References listed on IDEAS

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    More about this item

    Keywords

    urban residents; wage differentials; rural migrant workers; self-employment;

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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