Economic Transition and Private-Sector Labor Demand: Evidence from Urban China
54 Pages Posted: 11 Dec 2013 Last revised: 14 Apr 2016
Date Written: March 2016
This paper studies the policy determinants of economic transition and estimates the elasticity demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986-2005. We do not find any increase in self-employment. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic, with elasticity estimates ranging between -3.1 and -5.3.
Keywords: Economic Transition, Structural Change, Labor Mobility
JEL Classification: O12, P2, P26, J23
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