It depends on the situation. In most cases I use String.Empty because I don't want to be doing null checks every time I attempt to use a string. It makes the code a lot simpler and you are less likely to introduce unwanted NullReferenceException crashes.
I only set the string to null when I need to know if it has been set or not and where an empty string is something valid to set it to. In practice, I find these situations rare.
