A cross-sectional exploration of labor supply, gender, and household wealth in urban China

Abstract

We propose a modeling framework that uses only cross-sectional data to disentangle labor supply and demand choices simultaneously. This modeling framework extends the labor-market analytical toolkits to adapt to environments where data are limited, flexibility in working hours is lacking, or structural changes are present, as is the case in most emerging and low-income countries. We showcase our model by using the 2011 China Household Finance Survey to decipher labor market choices in urban China. We find that the main discrepancies in labor supply between males and females are driven by the number and age of children, the lower utility of working rather than fewer job opportunities for females, and larger impacts of education and work experience on females’ job opportunities. Household wealth in the form of ‘cash inflow’ incentivizes individuals not to work, while wealth in the form of ‘stock’ induces higher utility to work for both males and females. The interpretation of empirical findings hinges on particular assumptions that might be disputed.