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The Dynamics of Informal Employment in Urban China

Quheng Deng and Xinxin Ma

No 2018-3, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

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.

Keywords: dynamics; informal employment; persistence; spurious state dependence; genuine state dependence (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-iue and nep-tra
Date: 2018-05
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