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The Determinants of Labor Supply of Informal Sector: Two Hypotheses on Self-Employment

  • Xinxin Ma
Chapter

Abstract

The self-employed sector is a representative informal sector, and it has influence on income inequality as noted in previous studies. In China, along with the economic transition and economic development, the number of self-employed workers (“Geti Gongshang Hu”) in urban regions increased greatly, and the labor market is segmented by the informal sector and formal sector which seems to be similar with the developed countries and other developing countries. Why is there a large growth in self-employment in urban China during the economic transition period? There are two hypotheses proposed to answer this: the disguised unemployment hypothesis and the business creation hypothesis. Chapter  6 investigates the mechanism of becoming a self-employed worker based on these two hypotheses. It is found that excepting the older generation group in 2013, compared with employees, a worker in the self-employment sector does not gain more, and there seemingly is no better choice in urban China, which means the disguised unemployment hypothesis is supported. It also indicated that the liquidity constraint problem may be a main obstruction factor for the new business creation and innovation in China.

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Xinxin Ma
    • 1
  1. 1.Hitotsubashi UniversityTokyoJapan

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