ABSTRACT
Since the launching of the policy of reform and opening-up in the late 1970s, both rural and urban labor markets in China have changed dramatically. By allowing market mechanisms to play a greater role in wage-settings and labor mobility to reappear, economic liberalization has revived incentive mechanisms and improved the efficiency of labor allocation across sectors, enterprises, and regions1. Despite the loosening enforcement of the hukou system2
that seriously impedes rural-urban migration, rural and urban labor markets remain highly segmented. Within both urban and rural labor markets, various rigidities also remain and reforms are still uneven and incomplete. In particular, restrictions on labor mobility across sectors and ownership in the urban labor market have remained quite strong until the mid-1990s (Knight and Song 1995; Zhao 2002; Chen et al. 2005).
