Embracing the Market: Entry to Self-Employment in Transitional China, 1978 -1996

This paper introduces labor market transition as an intervening process by which the overarching institutional transition to a market economy alters social stratification outcome. Rather than directly address income distribution, it examines the pattern of workers' entry to self-employment in reform-era China (1978-1996), focusing on rural-urban differences and the temporal trend. Analyses of data from a national representative survey in China show that education, party membership and cadre status all deter urban workers' entry to self-employment, while education promotes rural workers' entry to self-employment. As marketization proceeds, the rate of entry to self-employment increases in both rural and urban China, but urban workers are increasingly more likely to take advantages of new market opportunities. In urban China, college graduates and cadres are still less likely to be involved in self-employment, but they are becoming more likely to do so in the later phase of reform. The diversity of transition scenarios is attributed to the variations in concrete institutional environments.