NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Transition and Private-Sector Labor Demand: Evidence from Urban China

Lakshmi Iyer, Xin Meng, Nancy Qian, Xiaoxue Zhao

NBER Working Paper No. 19733
Issued in December 2013
NBER Program(s):Development Economics, Labor Studies

This paper studies the policy determinants of economic transition and estimates the 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. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic. We provide suggestive evidence that the reform equalized wages across sectors and reduced private-sector rents.

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Document Object Identifier (DOI): 10.3386/w19733

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