Multidimensional cultural distance and self-employment of internal migrants in China

Abstract

This research examines the roles of multidimensional cultural distance including both value and practice on supporting urbanization, focusing on self-employment of internal migrants in China. Prior to examining the effect of cultural distance, we confirm that self-employment is the dominant choice for urban migrants. Building on Hofstede's theory, we calculating the Kogut and Singh Index of cultural values and cultural practices based on survey data set of World Values. After combining these two indices with China Migrants Dynamic Survey data to construct a comprehensive cross-sectional dataset of 521,166 observational samples from 2010 to 2016, we show that both cultural value distance and cultural practice distance have a negative effect on self-employment of internal migrants in China. According to the theory of labor market segmentation, our results reveal that cultural distance is strongly negative associated with the likelihood for internal migrants to engage in self-employment both for opportunity purpose and necessary purpose. From heterogeneity analysis, negative effects of cultural distances exist in the service industry, manufacturing industry, and the Yangtze River Delta. Further discussion shows that cultural value distance also has an indirect influence on individual behavior through cultural practice. Our results suggest that cultural distance prevents migrants from integrating into the local labor market in the form of self-employment.