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Economic Transition and Private-Sector Labor Demand: Evidence from Urban China
This paper studies the policy determinants of economic transition and estimates the elasticity demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986–2005. We do not find any increase in self-employment. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic, with elasticity estimates ranging between -3.1 and -5.3.
Keywords: Economic Transition;