Formal Employment, Informal Employment and Income Differentials in Urban China

Oaxaca’s study (1973), along with the China Health and Nutrition Survey (CHNS) questionnaire (2004 and 2006 pooling data), is used as the basis for this study in estimating the formal-informal employment hourly income differential, as well as the formal and informal male-female employment hourly income differential in urban China. The results indicate that differences in the characteristics between formal and informal employment account for a much higher percentage of the hourly income differential than do discrimination. In addition, ignoring the sample selection bias, one finds the formal male-female, the informal male-female hourly income differential and the degree of discrimination against informal women’s employment will be overestimated; conversely, the degree of discrimination against formal women’s employment will be underestimated