Abstract
This study provides evidence on the determinants of self-employment for urban local registration residents in China. Using CHIP2007, the employment status is divided into four categories: self-employed employers, own-account workers, employees, and the unemployed. Several major con-clusions emerge. First, compared with the employee, holding other factors (e.g., human capital) constant, the wage premium associated with the self-employed employer is higher, while the wage premium associated with own-account workers is lower. Second, the influence of the wage premium on the self-employed employer is negatively significant, and the influence of the wage premium on the own-account workers is insignificant. These results reveal that compared with employees, being a self-employed or own-account worker is seemingly not a better choice for employment in urban China; being self-employed is similar to disguised unemployment. Third, considering the influence of all the factors: the wage level categories (wage levels in the public and private sectors), the entry period categories (the SOE reform period and the recent period), the age categories (aged 50 and over, and aged below 50), and the regional categories (the East, the Central, and the West regions), robust checks were conducted. In the own-account workers group, the business creation hypothesis is nearly rejected again; in fact, it is only supported for workers who entered the self-employment sector in the SOE reform period (entered early into the self-employment sector group), and workers aged over 50.
Highlights
The self-employed sector is a representative informal sector of the employment market as noted in previous studies1
The distributions of employment status of urban registration residents in urban China are shown in Table 2, the divisions are as follows: 1.4 percentage self-employed employers, 2.71 percentage own-account workers, 65.84 percentage employees, and 30.02 percentage the unemployed
First (Panel A), the results show that the wage premium does not statistically affect the probability of employment status
Summary
The self-employed sector is a representative informal sector of the employment market as noted in previous studies. De Soto (1989) described the emergence of self-employed workers as “the foundation of development.”. Along with the economic transition in urban China, the number of self-employed workers increased from 150 thousands in 1978 to 21.36 million in 2000, before further increasing to 52.27 million in 2011 (NBS, 2012). Why was there a large change in the size of the self-employed sector in urban China during the economic transition period? The second explanation is that along with the transition from a planned to a market economy, the government enforced ownership reform of State-Owned Enterprises (SOEs) from the 1980s onward. A section of employees with urban registration in the SOEs became laid-off workers and some of them re-employed in the informal sector (e.g., by becoming self-employed workers). This paper discusses the determining factors for the self-employed workers in urban China
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