Self-employment in Rural China:Its Development,Characteristics,and Relation to Income

Changes in the employment structure in rural China were studied with a focus on off-farm self-employment.Data from the Chinese Household Income Project surveys were used,covering the same 14 provinces from 1988 to 2018.We found that the proportion of adults in rural China with self-employment as their primary form of off-farm employment increased from only 2 percent in 1988 to 11 percent in 2013,with no further increases through 2018.In 1988 and 1995,the rate of self-employment was highest in the eastern region but this regional pattern subsequently disappeared.The probability of being self-employed in rural China was higher among married males than among unmarried persons.Having a migration experience increased the likelihood of being self-employed.Since 1995,self-employed households have had a higher average income than other categories of household.Based on estimates of income functions,we conclude that the income premium from being self-employed increased rapidly from 1988 to 1995 to become remarkably large when only a few adults were self-employed.However,as a larger fraction of the rural population entered self-employment,the payoff from being self-employed has rapidly diminished,although it was still substantial in 2018.