Economic Transition and the Determinants of Self-employment in Urban China: 2007-2013

This paper conducts two hypotheses testing and provides evidence on the determinants of self-employment for local urban residents and migrants in urban China. Using CHIP2007 and CHIP2013, the employment status is divided into four categories― self-employed employers, own-account workers, employees, and the unemployed. Several major conclusions emerge. First, utilizing the imputed wage premiums, the business creation hypothesis is rejected for both the local urban residents and migrants groups in 2007. However, in 2013, the business creation hypothesis is supported when a worker choice to become a self-employed employer. Whereas the influences of wage premiums on the probability of becoming an own-account worker are negatively significant for both the local urban residents group and the migrants group, so the business creation hypothesis is rejected when a worker choice to become an own-account worker. Second, the choice to become a self-employed employer for the local urban residents group, and the choice to become an own-account worker for the migrants group in the initial economy reform period can gain more benefit, so the business creation hypothesis is supported for older generation group, whereas this hypothesis is rejected for the younger generation group for both the local urban residents and migrants groups.