2001
Abstract:
Despite ongoing restructuring of the Chinese economy, barriers to labor mobility and attendant
stratification of China’s labor markets remain significant. Those barriers serve to reduce the efficiency of
labor market allocations and accordingly inhibit wage equilibration and productivity growth. Constraints
on labor mobility further hamper growth in private employment as well as government efforts to
rationalize economic activity through the closure of insolvent state-owned enterprises. In this study, we
apply unique matched worker-firm data from a recent survey of urban workers to examine existent
stratifications of labor markets and transitions to private employment in urban China. In so doing, the
analysis assesses wage determination, worker preferences for state versus private employment, and job
turnover. As expected, research findings indicate higher returns to schooling in non-state sectors, in cities
with more rapid private sector growth, in more profitable enterprises, and for less risk-averse workers.
Results further show that preferences for state-sector employment decrease with schooling but increase
with worker risk aversion. Workers’ job-change prospects decrease with age, risk aversion, and
restrictiveness of job preferences. Overall, results point to the importance of labor market transition
policies and indicate the sizable efficiency and productivity gains that might arise from enhanced labor
mobility.
