Economic analysis of chinese urban labour market: effects of labour laws reform and hukou reform

The thesis consists of three main chapters. Chapter 2 studies the effects of Employment Protection Legislations (EPL) on labour market outcomes in the Mortensen Pissarides (1994) job search and matching model with an informal sector. The model predicts that rising costs of laying off workers unambiguously decrease the labour market’s tightness and a firm’s reservation productivity. Both job creation and job destruction are eschewed. In addition, given a Cobb–Douglas-form job matching function, there is a U-shaped relationship between layoff costs and the size of the informal sector and an inverse U-shaped relationship between layoff costs and the wage rate in the formal and informal sectors.
Chapter 3 empirically examines the effect of 2008 China’s Labour Contract Law (CLCL) on the formal–informal divide in the China’s urban labour market. We use a range of indicators measure the regional enforcement of EPL and regional judiciary orientation. Panel data discrete choice models are employed to predict individuals’ probabilities of being in each employment status. The results provides weak evidence for an association between the regional enforcement of EPL and worker’s employment decisions.
Chapter 4 explores the wage gap between urban workers and rural-to-urban migrants with a non-parametric matching approach proposed by Nopo (2008). Results show that the share of the unexplained wage gap to the mean wage gap between urban workers and rural migrants decreases significantly from nearly 50% to 29.7% if we compare only comparable individuals.