Abstract
This paper discusses whether rural-urban migrants who live in cities can raise their earnings by engaging in self-employment activities. I construct instruments based on migrants’ motivation for leaving home and five China marketization index to identify the effect of self-employment on earning. Using two-stage least squares models, I find that rural-urban migrants who move to cities are more likely to be self-employed than local urban residents. The empirical result shows that workers with low education and low skills negatively select into self-employment, but they can earn more relative to their wage-earning counterparts. In addition, self-employment is found to improve migrants’ living standard and socioeconomic status.