‘ONE HOUSEHOLD/TWO SYSTEMS’ AND THE TRANSITION TO PRIVATE EMPLOYMENT IN CHINA CALLA WIEMER  Consultant to the Asian Development Bank Abstract. Under China’s dual-track approach to reform, ‘one household/two systems’, or combi- ning state and private employment within a family, connotes having the best of both worlds. Drawing upon work history data for 5000 households, the present study looks at who is employed in the private sector. Findings are that marriage to a state-employed spouse actually reduces the probability of one’s holding a private sector job and that the eects of living with a state-connected parent are mixed. Were households more actively pursuing a one-household/two-systems strategy, the transition from state dependence would be expedited. 1. CHINA’S EMPLOYMENT TRANSITION China has pursued a gradual path of reform, preserving the state sector while encouraging a private sector to develop along side. Jobs in the state sector have remained relatively secure, and even through the 1990s with the acceleration of furloughing and early retirement, job-related benefits have to some degree gen- erally been maintained for those no longer actively working. In addition to their security, state jobs carry with them a host of in-kind benefits including subsidised housing, pensions, medical coverage, and personal connections within a system where connections count for a great deal. Jobs being generated in the private sector, by contrast, typically oer higher cash wages but less security and a smaller accoutrement of in-kind benefits. 1 In this dual-track environment, ‘one household/two systems’ 2 by the late 1980s came to epitomise the savvy household’s strategy for extracting the best of both worlds. 3 A parent or one spouse would hold down a job in the state 1 See Fan et al. (1998) for a description of state versus private employment circumstances and Zhao (2001) on the value of in-kind benefits. 2 ‘Yi jia, liang zhi.’ 3 The first time I heard the term was in 1989 being used by an academic economist to talk about his live-in daughter and son-in-law who had just opened a butcher shop. This paper had its genesis during the period 1994–1998 when I lived in Beijing. During that time I had occasion to discuss the idea with people spanning the range from academics and government ocials to cab drivers and nannies and finally survey researchers.  Address for correspondence: Calla Wierner, 2253 Glendon Avenue, Los Angeles, CA 90064, USA, cjwierner@hotmail.com. The author would like to thank the World Bank for support of survey expenses; Albert Keidel and Tamar Manuelyan-Atinc at the Bank for encouragement and ideas; Horizon Survey Research for conducting the survey and its President Yuan Yue for keeping the customer satisfied; and Yu Mingde of the Peking University China Center for Economic Research for assistance with questionnaire design. Helpful comments on earlier drafts were received from Marie Arneberg, Michael Johnston, Li Shi, Randy Peerenboom, Louis Putterman, and two anonymous referees. Pacific Economic Review, 7: 1 (2002) pp. 199–219 Ó Blackwell Publishers Ltd 2002