The driving effect of informal economies on urbanization in China

Abstract

This paper examines the rise of informal economies in China, a hidden driving force overlooked in studies on China's urbanization. Estimating the size of informal economies using the multiple indicators multiple causes model, the paper employs mathematical models to examine the driving effect of informal economies on urbanization and to reveal the paths by which such effect works. The results were as follows. (1) In 2018, the size of the informal economy in China accounted for 23.5% of GDP with an output value of 21.16 trillion yuan. (2) The informal economy had a driving effect on China's urbanization, and every 1-percentagepoint increase in its share of the GDP led to an increase of 0.291 percentage points in the urbanization rate. (3) The informal economy's effect on urbanization showed regional differences, decreasing in size from the eastern to the central to the western regions. (4) The informal economy drives urbanization through four paths -by promoting foreign direct investment (FDI), fixed asset investment (FAI), social consumption (SC), and secondary sector employment (SSE). Their effect sizes are ranked in descending order as follows: FDI > FAI > SC > SSE. This paper contributes to theories on urbanization dynamics and process in China by highlighting the role of the informal economy as a hidden economic power lurking in the city.

Differences in Subjective Well-Being between Formal and Informal Workers in Urban China

“…Since the adoption of reform and opening-up policies in 1978, China has seen the informalization of employment and a remarkable rise in informal employment. It is estimated that 183 million workers were engaged in the informal economy in 2018, which accounts for about 9% of the two billion informal workers worldwide [27]. However, the relationship between informal employment and subjective well-being is unclear.…”

“…In view of the complexity of the informal sector in developing countries, the ILO also specifies that each country and region can categorize informal employment according to the characteristics of the position and entity [47]. In China, based on international standards and the conditions of informal employment in the country, many scholars have argued that employees in the informal sector should include self-employed persons, employees in private enterprises without labor contracts, and a great number of informal workers in unregistered enterprises [48,49]. Wu and Cai consider employees of temporary work, employed workers without formal labor contracts, self-employed workers, and home helpers as informal workers and establish three statistical criteria to satisfy the different research requirements [50].…”

Efficiency and greenness evaluation of urban land use change in the Yangtze River Economic Belt, China

“…Theoretically, a reasonable LCRPGR value should be equal to or close to 1, indicating a balance between urban land use consumption and urban population growth (Wang et al, 2022). The IORFA can measure the efficiency of urban construction (Huang et al, 2022). A smaller IORFA value indicates a higher return on investment.…”

Spatiotemporal Dynamics in Economic, Social, and Environmental Upgrading in China: Coupling Coordination and Influencing Factors

“…Similarly, environmental upgrading showed a relatively stable growth trend, rapidly increasing from 0.18 in 1996 to 0.46 in 2020, with a faster growth rate compared to social and economic upgrading. The primary cause for the social downgrade prior to 2002 was the mid-1990s reform of state-owned enterprises, which led to millions of workers being laid off or compelled to enter a highly competitive labor market [75]. This market-oriented reform dismantled the "iron rice bowl" of stable employment and income provided by the state sector during the early socialist era [76], resulting in the loss of stable jobs and a decline in social welfare coverage for housing, pensions, children's education, and healthcare [77].…”