china's urban labor market bueno

china's urban labor market bueno - Economic Liberalization...

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Economic Liberalization with Rising Segmentation in China’s Urban Labor Market Economic Liberalization with Rising Segmentation in China’s Urban Labor Market * Sylvie Démurger GATE, Université Lyon 2– CNRS 93, chemin des Mouilles BP 167 F-69131 Ecully Cedex France demurger@gate.cnrs.fr and HIEBS The University of Hong Kong Martin Fournier GATE, Université Lyon 2– CNRS 93, chemin des Mouilles BP 167 F-69131 Ecully Cedex France fournier@gate.cnrs.fr Li Shi School of Economics and Business Beijing Normal University 19, Xinjiekouwai Dajie Beijing 100875, China lishi89@263.net Wei Zhong Institute of Economics Chinese Academy of Social Sciences 2, Yuetan Beixiaojie Beijing 100836, China wei_zhong@cass.org.cn Asian Economic Papers 5:3 © 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology Abstract The massive downsizing of the state-owned sector and the con- comitant impressive growth of the private sector at the end of the 1990s have altered the nature of the Chinese labor market. The introduction of market mechanisms has contributed to increasing labor turnover and competitiveness in market wages. Using two urban household surveys for 1995 and 2002, this paper analyzes the evolution of labor market segmentation in urban China by applying an extended version of Oaxaca-Blinder decomposition methods. During the seven-year period, the sharp increase in real earnings for all workers shows substantial differences across own- ership, economic sectors, and regions. We find strong evidence of a multitiered labor market along these three major lines and high- light increasing segmentation within each of the three dimensions, with the gap between the privileged segments of the labor mar- ket and the most competitive segments widening over time. 1. Introduction Since the launching of the policy of reform and opening up in the late 1970s, both rural and urban labor markets in China have changed dramatically. By allowing market mechanisms to play a greater role in wage setting and la- bor mobility to reappear, economic liberalization has re- vived incentive mechanisms and improved the efªciency of labor allocation across sectors, enterprises, and regions. 1 * Paper presented at the Asian Economic Panel meeting held in Seoul, 20–21 March 2006. The authors are grateful to discussants and participants for helpful comments. 1 The labor mobility from agricultural to nonagricultural sectors has been pointed out as a signiªcant source of economic growth in China since the beginning of the reforms (Cai 2005).
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Despite the relaxing enforcement of the hukou system, 2 which seriously impedes rural-urban migration, rural and urban labor markets remain highly segmented. Within both urban and rural labor markets, various rigidities also remain, and re- forms are still uneven and incomplete. In particular, restrictions on labor mobility across sectors and ownership in the urban labor market remained quite strong until the mid-1990s (Knight and Song 1995; Zhao 2002; Chen, Démurger, and Fournier 2005).
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china's urban labor market bueno - Economic Liberalization...

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