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Economic Transition and Private-Sector Labor Demand: Evidence from Urban China

  • Lakshmi Iyer
  • Xin Meng
  • Nancy Qian
  • Xiaoxue Zhao

This paper studies the policy determinants of economic transition and estimates the demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986-2005. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic. We provide suggestive evidence that the reform equalized wages across sectors and reduced private-sector rents.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19733.

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Date of creation: Dec 2013
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Handle: RePEc:nbr:nberwo:19733
Note: DEV LS
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  1. Meng,Xin, 2009. "Labour Market Reform in China," Cambridge Books, Cambridge University Press, number 9780521121118.
  2. Chong-En Bai & Jiangyong Lu & Zhigang Tao, 2006. "The Multitask Theory of State Enterprise Reform: Empirical Evidence from China," American Economic Review, American Economic Association, vol. 96(2), pages 353-357, May.
  3. Ekaterina Zhuravskaya, 2007. "Whither Russia? A Review of Andrei Shleifer's A Normal Country," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 127-146, March.
  4. Denisova, Irina & Eller, Markus & Frye, Timothy & Zhuravskaya, Ekaterina, 2009. "Who Wants To Revise Privatization? The Complementarity of Market Skills and Institutions," CEPR Discussion Papers 7260, C.E.P.R. Discussion Papers.
  5. Andrei Shleifer & Daniel Treisman, 2005. "A Normal Country: Russia After Communism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 151-174, Winter.
  6. Angrist, Joshua D, 1996. "Short-Run Demand for Palestinian Labor," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 425-53, July.
  7. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  8. Daron Acemoglu & David H. Autor & David Lyle, 2002. "Women, War and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century," NBER Working Papers 9013, National Bureau of Economic Research, Inc.
  9. Aghion, Philippe, 1993. "Economic reform in Eastern Europe : Can theory help?," European Economic Review, Elsevier, vol. 37(2-3), pages 525-532, April.
  10. Kikeri, S., 1998. "Privatization and Labour. What Happens to Workers When Governments Divest?," Papers 396, World Bank - Technical Papers.
  11. Roland, GĂ©rard, 1994. "On the Speed and Sequencing of Privatization and Restructuring," CEPR Discussion Papers 942, C.E.P.R. Discussion Papers.
  12. Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, 08.
  13. Chong-En Bai & David D. Li & Yingyi Qian & Yijiang Wang, 1999. "Limiting Government Predation Through Anonymous Banking: A Theory with Evidence from China," William Davidson Institute Working Papers Series 275, William Davidson Institute at the University of Michigan.
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