Informal employment and its effect on the income distribution in urban China |
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| Affiliation: | 1. Economic Research Centre of Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, Japan;2. Hubei University of Economics, China;3. Institute of Population and Labour Economics, Chinese Academy of Social Sciences, No. 5 Jianguomennei Dajie, Beijing, China;4. University of International Business and Economics, 10 Huixin East Street, Chaoyang District, Beijing, China;1. Department of Economics, University of New Mexico;2. School of Public Economics and Administration, Shanghai University of Finance and Economics;1. Luxembourg Institute of Socio-Economic Research (LISER), Esch-sur-Alzette, Luxembourg;2. National Institute for the Analysis of Public Policies (INAPP);3. Department of Economics, Ghent University, Ghent, Belgium;4. IZA - Institute of Labor Economics, Bonn, Germany;5. GLO - Global Labor Organization Essen, Germany;6. University of Modena and Reggio Emilia, Modena, Italy;1. College of Economics, Fujian Agriculture and Forestry University, China;2. Department of Economics, University at Buffalo, SUNY, USA;3. School of Economics and Management, Fuzhou University, China;4. Department of Industrial and Systems Engineering, University at Buffalo, SUNY, 317 Bell Hall, Buffalo, NY 14260-2050, USA |
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| Abstract: | This paper discusses the issue of informal employment and its effect on the income distribution in China using datasets from the China Urban Labour Surveys of 2005 and 2010. Based on a new definition of informal employment, we estimated the proportion of informal employment relative to total non-agricultural employment in urban China and found it to be 49.7% in 2005 and 40.3% in 2010. Meanwhile, our study illustrated that informal employees' earnings were 67% that of formal employees, and this large earnings gap raised the Gini coefficient to 0.42 in 2005. The Blinder–Oaxaca decomposition result shows that the earnings gap explains more than half of the overall personal income inequality in urban China. These results indicate that informal employment has a significant effect on the income distribution in urban China. Consequently, regulating the labour market, eliminating job discriminations and legislating the informal employment should be considered as alternative means of reducing inequality in China. |
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