The informal sector and rural-urban migration - A Chinese case study

Since the late 1980s and early 1990s, massive rural-urban migration has flooded most Chinese cities. Many studies have examined various aspects of this important movement, but none has investigated the role the urban informal sector plays in this movement. In the literature, this issue is controversial. Most classical migration models treat the informal sector as a temporary employment opportunity for migrants, though some empirical studies challenge this assumption and suggest that the informal sector may play an important role in economic development. This study uses a survey data set of 1504 rural-urban migrants in one Chinese city to examine this interesting aspect of rural-urban migration. The study distinguishes between the wage-earner and self-employed groups within the informal sector. It is found that the two groups in the informal sector have played different roles in attracting migrants when compared to the formal sector. While the wage-earner group may provide temporary employment opportunities to migrants, the self-employed group appears to be a desirable employment choice. It is also found with regard to income and other benefits that both the wage-earner and the self-employed groups in the informal sector are better off than those who work in the formal sector.