Employment Constraints and Sub-optimality in Chinese Enterprises

John Knight and Lina Song

Oxford Economic Papers, 1999, vol. 51, issue 2, 284-99

Abstract: In China the employment of rural migrants is tightly controlled by government, with regard both to numbers and to jobs: urban residents receive preference and are protected against competition from migrants. A survey of enterprises employing both urban residents and rural migrants in four cities is analyzed, using enterprise-level earnings comparisons, employment functions and production functions. The authors find both 'job discrimination' and 'wage discrimination' against migrants. The two groups are highly imperfect substitutes or, in a sense, complementary: migrants do the jobs that nonmigrants will not or cannot do. The marginal product of migrants exceeds their wage whereas that of nonmigrants is below their wage. Although many enterprises have surplus urban workers, they find it beneficial to hire migrant workers as well and are constrained in their employment of migrants. Copyright 1999 by Royal Economic Society.

Date: 1999
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