The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai

Abstract

China had separate rural and urban labor markets for about 40 years until the late 1980's when the restrictions on rural–urban migration were gradually eased. By the end of the 1980's and in the early 1990's, the number of rural migrants working in the urban areas began to increase dramatically. However, rural migrants are treated differently from their urban counterparts in terms of occupational attainment and wages. This paper utilizes two comparable survey data sets to analyze the degree to which the segregation between rural migrants and urban residents has occurred from the point of view of occupational segregation and wage differentials. A significant difference in occupational attainment and wages exists between rural migrants and urban residents. Most of the difference cannot be explained by productivity-related differences between the two groups, implying that urban residents are favorably treated while their migrant counterparts are discriminated against. J. Comp. Econ., September 2001, 29(3), pp. 485–504. Australian National University, Canberra, ACT 0200, Australia; Chinese University of Hong Kong, Shatin, N.T., Hong Kong, China. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: J71, J40, O15, P23.