Health and Entrepreneurship in China: Opportunities for the Disadvantaged

Jenny Liu, University of California, Berkeley

Significant returns to health have previously been found in China’s labor market during economic transition in the 1990s. This paper assesses the role of health and health insurance in driving privatization and entrepreneurship from 1991 to 2004 using data from the China Health and Nutrition Survey. Results indicate that health insurance may severely deter labor mobility into the private sector and entrepreneurship. Relatively healthy rural workers (no co-morbidities, better self-reported health status), but relatively unhealthy urban workers (disabled) are more likely to participate in the private sector and in entrepreneurship. Moreover, workers from less-advantaged socioeconomic groups—women, less-educated, less wealthy, elderly—disproportionately supply labor to the private sector in non-wage jobs. Not surprisingly, men and middle-aged workers are more likely to be self-employed owners of a business, but the less-educated are more likely to work in a household business in rural areas. Thus, China’s new entrepreneurs are not as select class of workers as some would imagine.