This paper, based on the latest CULS3 data , provides empirical evidence and demonstrates features of returns to education by comparing local vs. migrant labors, formal vs. informal employment, formal vs. informal jobs and formal vs. informal sectors in China urban area. In particular we still focus on the difference of returns to regular education and vocational education among different group. Besides, we also mainly pay attention to the influence on individual’s returns to education if other family members are engaged in formal employment and if characteristics of other family members are controlled, including household size, share laborers, share male labourer, mean education of other labor, highest education of other labor, mean age of other labor, and if certain city variables are controlled, such as GDP per capita, GDP growth rate, government spending per capita, etc.
The plan of this paper is as follows. In the first section, we present a brief introduction and provide a brief review literature and informality of labor market in urban china on this subject. In the second section, we give some statistical description of relevant variable used in this paper. The next section discusses and analyzes the estimation results by using Heckman, switching regression, quantile regression and OLS methods. The final section makes a preliminary conclusion based on the empirical analysis.
1. Introduction
The urban economy in the most developing counties can be classified into the formal or modern sector and the informal or traditional sector and is also a universal phenomenon (Kazuhiro, 2007). This has become a stylized fact that the informal sector is often the most important employment opportunity in developing countries (Isabel & Andrey, 2011). Extensively researched topics for urban informality mainly focus on two aspects; one is features of informal sector and distribution; the other is theoretical research on the causes and consequences of informality. For example, According to ILO (1972, 2002), Kazuhiro (2007), etc., the informal sector is characterized by small firm sizes, unskilled jobs, low wages, and the loose enforcement of laws and regulations, and it incorporates sectors such as petty trading, domestic services, repair services, and basic manufacturing. According to Jamal and Weeks (1988), rural–urban income differentials are substantial in many sub-Saharan African nations but the income differentials for unskilled workers are very small. Ranis and Stewart (1999) find that about 70% of the labor forces in the informal sector in Manila are engaged in trading and only about 13% are in manufacturing. Similar numbers are found for many Latin American economies as well (Marcouiller et al., 1997). For theoretical research on the causes and consequences of informality, it can be seen from Maloney (2004), Fields (2005), Loayza and Rigolini (2006), Amaral and Quintin (2006), Bennett and Estrin (2007), Bennett (2008) and World Bank (2007). However, this literature is dominated by the a priori assumption that the informal sector is homogenous. In fact, there some evident differences in the different type of informal employment. Results of informal sector employment is to associate with earnings of work, especially the proliferation of informal self-employment in developing countries is not economically inefficient (Gustavo Yamada, 1996).
By nearly any measure, China is the world’s largest transition economy and the world’s largest developing country. So that improved understanding of informality in China may provide key lessons and insights for other countries. Beginning in the late 1990s, China’s urban labor market experienced a rapid diversification of ownership types. From 1995 to 2005, the percentage of China’s urban labour force that was undocumented (not officially registered as employees of formal sector work units or as self-employed workers) increased from 9 percent to 36 percent (Park & Cai, 2008). Despite the great importance of research on informal issues, there is a glaring lack of research and data sources for studying China’s informal labor market. The few studies of informal employment in China, mostly completed by members of this project’s research team, are primarily descriptive due to data limitations, and focus on defining and documenting the extent of informal employment (Cai and Park, 2007; Wu and Cai, 2006). China passed a landmark Labor Law in 1994, formalizing for the first time the system of labor contracting and employment (Cai, Du, and Wang, 2009).
At the same time, the last decade has witnessed an explosion of rural-urban migration in China. Data from the most recent NBS national rural household survey finds that rural migrants numbered 153 million in 2010, with up to ninety percent migrating to urban areas, where they form a large constituency within the growing informal sector. Like the rest of the world, China has been negatively impacted by the current global economic crisis. The informal sector, especially through self-employment opportunities, provides a cushion, or alternative employment option, for dislocated workers from both the formal and informal sectors. This paper provides empirical evidence and features between earnings of education and different type of Informal Labour employment, to be helpful understanding informal sector and employment results in China……
