City-level hukou-based labor market discrimination and migrant entrepreneurship in China
Abstract
A previously undocumented association between city-level degree of hukou-based labor market discrimination and migrant’s individual entrepreneurship engagement is examined. Applying the Oaxaca–Blinder decomposition analysis on the micro data from the China Migrants Dynamic Survey (CMDS) suggests that hukou-based labor market discrimination can on average explain a 6.3% differential in personal income for rural migrants relative to otherwise identical urban migrants. A one standard deviation increase in a city’s average hukou-based labor market discrimination is associated with roughly 2.9 percentage point higher of entrepreneurship rate among rural migrants, holding other things equal. Furthermore, city-level hukou-based labor market discrimination is associated with much higher propensity for engagement in necessitybased entrepreneurship compared with opportunity-based entrepreneurship. Our empirical work also suggests that the association between city-level hukou discrimination and migrant entrepreneurship is more prominent for people with middle level of education, young people, married people, and renters. Policy implications of these findings are discussed.
First published online 05 July 2021
Keyword : hukou discrimination, labor market, migrant entrepreneurship, China
How to Cite
Chen, J., & Hu, M. (2021). City-level hukou-based labor market discrimination and migrant entrepreneurship in China. Technological and Economic Development of Economy, 27(5), 1095-1118. https://doi.org/10.3846/tede.2021.15006
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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van der Zwan, P., Thurik, R., Verheul, I., & Hessels, J. (2016). Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs. Eurasian Business Review, 6(3), 273–297. https://doi.org/10.1007/s40821-016-0067-z
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Aidis, R., Estrin, S., & Mickiewicz, T. (2008). Institutions and entrepreneurship development in Russia: A comparative perspective. Journal of Business Venturing, 23(6), 656–672. https://doi.org/10.1016/j.jbusvent.2008.01.005
Bates, T., Jackson, W. E., & Johnson, J. H. (2007). Advancing research on minority entrepreneurship. The ANNALS of the American Academy of Political and Social Science, 613(1), 10–17. https://doi.org/10.1177/0002716207303405
Birley, S., & Westhead, P. (1994). A Taxonomy of business start-up reasons and their impact on firm growth and size. Journal of Business Venturing, 9(1), 7–31. https://doi.org/10.1016/0883-9026(94)90024-8
Block, J. H., Kohn, K., Miller, D., & Ullrich, K. (2015). Necessity entrepreneurship and competitive strategy. Small Business Economics, 44(1), 37–54. https://doi.org/10.1007/s11187-014-9589-x
Carter, N. M., Gartner, W. B., Shaver, K. G., & Gatewood, E. J. (2003). The career reasons of nascent entrepreneurs. Journal of Business Venturing, 18(1), 13–39. https://doi.org/10.1016/S0883-9026(02)00078-2
Chan, K. W. (2013). China: Internal migration. In I. Ness & P. Bellwood (Eds.), The Encyclopedia of global human migration. Blackwell Publishing Ltd. https://doi.org/10.1002/9781444351071.wbeghm124
Chan, K. W., & Buckingham, W. (2008). Is China abolishing the hukou system? The China Quarterly, 195(6), 582–606. https://doi.org/10.1017/S0305741008000787
Chan, K. W., & Zhang, L. (1999). The hukou system and rural-urban migration in China: Processes and changes. The China Quarterly, 160(1), 818–855. https://doi.org/10.1017/S0305741000001351
Chen, J., & Hu, M. (2019). What types of homeowners are more likely to be entrepreneurs? The evidence from China. Small Business Economics, 52(3), 633–649. https://doi.org/10.1007/s11187-017-9976-1
Chen, J., & Wang, W. (2019). Economic incentives and settlement intentions of rural migrants: Evidence from China. Journal of Urban Affairs, 41(3), 372–389. https://doi.org/10.1080/07352166.2018.1439339
Clark, K., & Drinkwater, S. (2000). Pushed out or pulled in? Self-employment among ethnic minorities in England and Wales. Labour Economics, 7(5), 603–628. https://doi.org/10.1016/S0927-5371(00)00015-4
Coate, S., & Tennyson, S. (1992). Labor market discrimination, imperfect information and self employment. Oxford Economic Papers, 44(2), 272–288. https://doi.org/10.1093/oxfordjournals.oep.a042046
Constant, A., & Zimmermann, K. F. (2006). The making of entrepreneurs in Germany: Are native men and immigrants alike? Small Business Economics, 26(3), 279–300. https://doi.org/10.1007/s11187-005-3004-6
Démurger, S., Gurgand, M., Li, S., & Yue, X. (2009). Migrants as second-class workers in urban China? A decomposition analysis. Journal of Comparative Economics, 37(4), 610–628. https://doi.org/10.1016/j.jce.2009.04.008
Evans, D., & Leighton, L. (1989). Some empirical aspects of entrepreneurship. American Economic Review, 79(3), 519–535. https://www.jstor.org/stable/1806861
Fossen, F. (2012). Gender differences in entrepreneurial choice and risk aversion – A decomposition based on a microeconometric model. Applied Economics, 44(14), 1795–1812. https://doi.org/10.1080/00036846.2011.554377
Gagnon, J., Xenogiani, T., & Xing, C. (2011). Are all migrants really worse off in urban labour markets? New empirical evidence from China (IZA Discussion Paper No. 6268). https://ssrn.com/abstract=1981224
Glaeser, E., Rosenthal, S., & Strange, W. (2010). Urban economics and entrepreneurship. Journal of Urban Economics, 67(1), 1–14. https://doi.org/10.1016/j.jue.2009.10.005
Guo, C., & Miller, J. K. (2010). Guanxi dynamics and entrepreneurial firm creation and development in China. Management and Organization Review, 6(2), 267–291. https://doi.org/10.1111/j.1740-8784.2010.00180.x
Hisrich, R. D., & Brush, C. (1986). Characteristics of the minority entrepreneur. Journal of Small Business Management, 24, 1–8.
Hu, F. (2014). Risk attitudes and self-employment in China. China & World Economy, 22(3), 101–120. https://doi.org/10.1111/j.1749-124X.2014.12070.x
Hurst, E., & Lusardi, A. (2004). Liquidity constraints, household wealth, and entrepreneurship. Journal of Political Economy, 112(2), 319–347. https://doi.org/10.1086/381478
Kahn, S., La Mattina, G., & J. MacGarvie, M. (2017). “Misfits,” “Stars,” and immigrant entrepreneurship. Small Business Economics, 49(3), 533–557. https://doi.org/10.1007/s11187-017-9848-8
Köllinger, P., & Minniti, M. (2006). Not for lack of trying: American entrepreneurship in black and white. Small Business Economics, 27(1), 59–79. https://doi.org/10.1007/s11187-006-0019-6
Lee, L. (2012). Decomposing wage differentials between migrant workers and urban workers in urban China’s labor markets. China Economic Review, 23(2), 461–470. https://doi.org/10.1016/j.chieco.2012.03.004
Li, L., & Wu, X. (2014). Housing price and entrepreneurship in China. Journal of Comparative Economics, 42(2), 436–449. https://doi.org/10.1016/j.jce.2013.09.001
Liu, C. Y. (2012). Intrametropolitan opportunity structure and the self-employment of Asian and Latino immigrants. Economic Development Quarterly, 26(2), 178–192. https://doi.org/10.1177/0891242412443126
Liu, J., Hu, M., Zhang, H., & Carrick, J. (2019). Corruption and entrepreneurship in emerging markets. Emerging Markets Finance and Trade, 55(5), 1051–1068. https://doi.org/10.1080/1540496X.2018.1531242
Liu, Z. (2005). Institution and Inequality: The Hukou System in China. Journal of Comparative Economics, 33(1), 133–157. https://doi.org/10.1016/j.jce.2004.11.001
Lu, M., & Wan, G. (2014). Urbanization and urban systems in the People’S Republic of China: Research findings and policy recommendations. Journal of Economic Surveys, 28(4), 671–685. https://doi.org/10.1111/joes.12078
Lundborg, P., & Skedinger, P. (1999). Transaction taxes in a search model of the housing market. Journal of Urban Economics, 45(2), 385–399. https://doi.org/10.1006/juec.1998.2103
Ma, X. (2018). Labor market segmentation by industry sectors and wage gaps between migrants and local urban residents in urban China. China Economic Review, 47, 96–115. https://doi.org/10.1016/j.chieco.2017.11.007
Mandal, B., & Roe, B. E. (2014). Risk tolerance among national longitudinal survey of youth participants: The effects of age and cognitive skills. Economica, 81(323), 522–543. https://doi.org/10.1111/ecca.12088
Meng, X. (2012). Labor market outcomes and reforms in China. The Journal of Economic Perspectives, 26(4), 75–102. https://doi.org/10.1257/jep.26.4.75
Meng, X., & Zhang, J. (2001). The two-tier labor market in urban China: Occupational segregation and wage differentials between urban residents and rural migrants in Shanghai. Journal of Comparative Economics, 29(3), 485–504. https://doi.org/10.1006/jcec.2001.1730
Miller, K. D. (2007). Risk and rationality in entrepreneurial processes. Strategic Entrepreneurship Journal, 1(1–2), 57–74. https://doi.org/10.1002/sej.2
Mitchell, R. K., Smith, B., Seawright, K. W., & Morse, E. A. (2000). Cross-cultural cognitions and the venture creation decision. Academy of Management Journal, 43(5), 974–993. https://doi.org/10.5465/1556422
Modestino, A. S., & Dennett, J. (2013). Are American homeowners locked into their houses? The impact of housing market conditions on state-to-state migration. Regional Science and Urban Economics, 43(2), 322–337. https://doi.org/10.1016/j.regsciurbeco.2012.08.002
Müller, T. (2003). Migration, unemployment and discrimination. European Economic Review, 47(3), 409–427. https://doi.org/10.1016/S0014-2921(01)00177-5
Muravyev, A., Talavera, O., & Schäfer, D. (2009). Entrepreneurs’ gender and financial constraints: Evidence from international data. Journal of Comparative Economics, 37(2), 270–286. https://doi.org/10.1016/j.jce.2008.12.001
National Bureau of Statistics of China. (2017). China City Statistical Yearbook. http://www.stats.gov.cn/enGliSH/
National Health Commission of China. (2016). China migrants dynamic survey. https://www.chinaldrk.org.cn/wjw/#/home
Naudé, W. (2011). Entrepreneurship and economic development: An introduction. In W. Naudé (Ed.), Studies in development economics and policy. Entrepreneurship and economic development (pp. 3–17). Palgrave Macmillan UK. https://doi.org/10.1057/9780230295155_1
Neumark, D. (1988). Employers’ discriminatory behavior and the estimation of wage discrimination. The Journal of Human Resources, 23(3), 279–295. https://doi.org/10.2307/145830
Oxenfeldt, A. (1943). New firms and free enterprise. American Council on Public Affairs. https://www.worldcat.org/title/new-firms-and-free-enterprise-pre-war-and-post-war-aspects/oclc/2084075
Parker, S. C. (2005). Explaining regional variations in entrepreneurship as multiple occupational equilibria. Journal of Regional Science, 45(4), 829–850. https://doi.org/10.1111/j.0022-4146.2005.00394.x
Raijman, R., & Tienda, M. (2000). Immigrants’ pathways to business ownership: A comparative ethnic perspective. International Migration Review, 34(3), 682–706. https://doi.org/10.1177/019791830003400302
Rocha, V., Carneiro, A., & Varum, C. A. (2015). Entry and exit dynamics of nascent business owners. Small Business Economics, 45(1), 63–84. https://doi.org/10.1007/s11187-015-9641-5
Rosti, L., & Chelli, F. (2005). Gender discrimination, entrepreneurial talent and self-employment. Small Business Economics, 24(2), 131–142. https://doi.org/10.1007/s11187-003-3804-5
Schmalz, M., Sraer, D., & Thesmar, D. (2017). Housing collateral and entrepreneurship. The Journal of Finance, 72(1), 99–132. https://doi.org/10.1111/jofi.12468
Shane, S., Kolvereid, L., & Westhead, P. (1991). An exploratory examination of the reasons leading to new firm formation across country and gender. Journal of Business Venturing, 6(6), 431–446. https://doi.org/10.1016/0883-9026(91)90029-D
Shen, J. (2013). Increasing internal migration in China from 1985 to 2005: Institutional versus economic drivers. Habitat International, 39, 1–7. https://doi.org/10.1016/j.habitatint.2012.10.004
Simoes, N., Crespo, N., & Moreira, S. B. (2016). Individual determinants of self-employment entry: What do we really know? Journal of Economic Surveys, 30(4), 783–806. https://doi.org/10.1111/joes.12111
Song, Y. (2014). What Should economists know about the current Chinese Hukou System? China Economic Review, 29, 200–212. https://doi.org/10.1016/j.chieco.2014.04.012
Stanworth, J., Stanworth, C., Granger, B., & Blyth, S. (1989). Who becomes an entrepreneur? International Small Business Journal: Researching Entrepreneurship, 8(1), 11–22. https://doi.org/10.1177/026624268900800101
Stephens, H. M., Partridge, M. D., & Faggian, A. (2013). Innovation, entrepreneurship and economic growth in lagging regions. Journal of Regional Science, 53(5), 778–812. https://doi.org/10.1111/jors.12019
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