| Abstract: |
This paper studies the policy determinants of economic transition and
estimates the 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. Using the reform to
instrument for private-sector labor supply, we find that private-sector labor
demand is very elastic. We provide suggestive evidence that the reform
equalized wages across sectors and reduced private-sector rents. |