Embracing the Market: Entry into Self-Employment in Transitional China, 1978-1996

Abstract

This paper introduces labor market transition as an intervening process by which the macro institutional transition to a market economy alters social stratification outcome. Rather than directly addressing income distribution, it examines the pattern of workers’ entry into self-employment in reform-era China (1978-1996), focusing on rural-urban differences and the temporal trend. Analyses of data from a national representative survey in China show that education, party membership and cadre status all deter urban workers’ entry into self-employment, while education promotes rural workers’ entry into self-employment. As marketization proceeds, the rate of entry into self-employment increases in both rural and urban China, but urban workers are increasingly more likely to take advantages of the new market opportunities. In urban China, college graduates and cadres are still less likely to be involved in self-employment, but they are becoming more likely to do so in the later phase of reform. The diversity of transition scenarios is attributed to rural-urban differences in labor market structures.