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

Yuling Cui (), Daehoon Nahm () and Max Tani
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Yuling Cui: Macquarie University, Sydney
Daehoon Nahm: Macquarie University, Sydney

No 7191, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: urban residents; wage differentials; rural migrant workers; self-employment (search for similar items in EconPapers)
JEL-codes: C36 J61 J31 J21 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-ent, nep-lab, nep-lma, nep-mig, nep-tra and nep-ure
Date: 2013-01
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Published in: Australian Economic Review, 2015, 48 (4), 382-399

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