Using　the　Chinese　Household　Income　Project　(CHIP)　data,　we　find　a　30　percent　raw　differential　in　earnings　in　favor　of　state　workers　in　2002.　We　examine　the　degree　to　which　this　differential　is　a　pure　premium　by　using　a　Heckman　two-step　selection　model,　where　we　instrument　workers＇　preference　for　state　jobs　with　family　political　connections,　among　other　factors.　We　find　that　22　percent　of　the　observed　earnings　differential　is　a　pure　premium　to　a　worker　in　a　state　job　in　urban　China.　In　the　absence　of　a　political　transition　in　China,　state　jobs　remained　the　privileged　constituency　in　a　dual-track　transition　that　attracted　the　best　politically　connected　workers　in　urban　China　and　offered　them　a　pure　earnings　premium.