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The economic reform started in 1978 progressively pushed China into one of the largest market-oriented economies in the world. The reform also triggered substantial transformations in the labor market. The labor surplus generated by increased productivity in rural areas, together with the growth in labor demand driven by export-oriented sectors in urban areas, contributed to the largest movement of workforce in history. The rural-to-urban migration currently taking place is substantially contributing to the sustained economic growth of China – especially of its cities – but also raises important issues about segregation and inequality in the urban labor market. In contrast, migration has also significant consequences for the individuals left-behind in rural areas. How economic conditions in sending households and villages are affected by the remittances sent by migrants, or by their return from the cities, is crucial for assessing the benefits of migration. The gradual decline of state-owned companies and the rise of the private sector emphasize on the one hand the consequences that labor reallocation has on the occupational mobility of the workforce and on the other the crucial role that entrepreneurship will have in the future development of China. Pulled by economic growth, investments in education have substantially increased especially in urban areas, posing challenges on how skills can be efficiently allocated in the labor market. In the background, reforms of the welfare system have slowly started to take place. One clear challenge is how the social insurance and pensions system can be transformed into one that is more compatible with a market economy. Another issue will soon be its sustainability, considering the imminent shrinking of the labor force caused – among other things – by the one-child policy.

While there is evidence that return migration promotes entrepreneurship and self-employment of those who migrated, previous studies have not focused on whether migration provides the same benefits to individuals who did not migrate. Using a unique dataset that provides information on both current and return migrants in rural China (RUMiC), we investigate the impact of migration on entrepreneurship among individuals with no migration experience. We explore the self-employment choices of individuals who live in households with return migrants and individuals who live in households that have migrants currently in the city, comparing them with individuals living in non-migrant households. Our methodology allows us to control for the potential endogeneity between the migration and self-employment decisions. The results show that return migration promotes self-employment among household members who have not migrated. However, left-behind individuals are less likely to be self-employed when compared with those living in non-migrant households.

This paper first reviews the history of social insurance policy and coverage in urban China, documenting the evolution in the coverage of pensions, medical and unemployment insurance for both local residents and migrants, and highlighting obstacles to expanding coverage. The paper then uses two waves of the China Urban Labor Survey, conducted in 2005 and 2010, to examine the correlates of social insurance participation before and after implementation of the 2008 Labor Contract Law. A higher labor tax wedge is associated with a lower probability that local employed residents participate in social insurance programs, but is not associated with participation of wage-earning migrants, who are more likely to be dissuaded by fragmentation of the social insurance system. The existing gender gap in social insurance coverage is explained by differences in coverage across industrial sectors and firm ownership classes in which men and women work.

This paper explores the rural labor market impact of migration in China using cross-sectional data on rural households for the year 2007. A switching probit model is used to estimate the impact of belonging to a migrant-sending household on the individual occupational choice categorized in four binary decisions: farm work, wage work, self-employment, and housework. The paper then goes on to estimate how the impact of migration differs across different types of migrant households identified along two additional lines: remittances and migration history. Results show that individual occupational choice in rural China is responsive to migration, at both the individual and the family levels, but the impacts differ: individual migration experience favors subsequent local off-farm work, whereas at the family level, migration drives the left-behinds to farming rather than to off-farm activities. Our results also point to the interplay of various channels through which migration influences rural employment patterns.