First Name: Yuling
Department Dept of Economics
Supervisor(s): Massimiliano Tani , Daehoon Nahm
Self-Employment in China: Are Rural Migrant Workers and Urban Residents Alike?
(1) Analyses whether the underlying drives into self-employment for rural migrant workers and urban residents alike (2) whether the wage differential between self-employment and paid-employment is primarily driven by differences in the endowment of human resources or the result of institutional barriers.
(1) Mainly investigate the impact of the wage differential based on the logarithm of hourly wages on the self-employment selection when controlling individual characteristics. Petersen (1989) shows that the wage regression based on logarithm of monthly wages in which working hours as a predictor is routinely entered could produce inconsistent estimates when based on logarithm of hourly wages. Controlling for working hours is tantamount to specifying an equation for the hourly wage; (2) the impact of unemployment is also considered, which has been demonstrated as being crucial in determining self-employment choice.
Key literature/theoretical perspective
Constant, A. F. & Zimmermann, K. F. 2004. The making of entrepreneurs in Germany: Are native men and immigrants alike? IZA Discussion Paper No. 1440, Bonn.
Taylor, M. P. 1996. Earnings, independence or unemployment: Why become self-employed? Oxford Bulletin of Economics and Statistics, 58, 253-266.
(1) the wage differential between self-employment and paid-employment is primarily driven by differences in the endowment of human resources rather than the result of institutional barriers; (2) Contrary to the results in previous studies of self-employment, Chinese rural migrants appear pushed into self-employment primarily by job instability, lack of confidence and life dissatisfaction in paid-employment rather higher potential earnings; (3) married and healthy individuals are more likely to go into self-employment, but this outcome is less likely when they are highly educated.
Being entrepreneurs reduces the wage gap between rural migrants and urban residents, which is conducive migrants assimilating into the urban labour market. Self-employed migrants reduce their wage gaps compared with self-employed urbanites by 9% on average, and compared with paid-employed urbanites by about 6%.
Practical and Social implications
Our paper is relevant to providing the implications for rural migrants integrating into the urban labour market by running small businesses, such as daily necessaries and catering to consumers. This is also observed by Borjas (1986), who investigates the self-employment experience of immigrants in the labour market of America. The findings seem to indicate that it is easier for immigrants integrating into a new labour market when they engage in small and low-cost industries; for example, the wholesale/retail/food services analysed in our paper. Although the current policy in China encourages the assimilation of rural migrants into urban areas by allowing rural migrants to settle in towns and small cities and invest in industrial project, no specific policies are implemented and guided by Administration for Industry & Commerce how to invest in the industry and which industry should be firstly considered by rural migrants in the urban market to survive longer.
self-employment, wage differentials, rural migrant workers, urban residents