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Social Identity and Inequality--The Impact of China’s Hukou System

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  • Farzana Afridi

    (Department of Economics, Delhi School of Economics, Delhi, India)

  • Sherry Xin Li

    (School of Economic, Political and Policy Sciences (EPPS) University of Texas at Dallas, GR31)

  • Yufei Ren

    (School of Economic, Political and Policy Sciences (EPPS) University of Texas at Dallas, GR31)

Abstract

We conduct an experimental study to investigate the causal impact of social identity on individuals? response to economic incentives. We focus on China?s decades old household registration system, or the hukou institution, which categorizes citizens into urban and rural residents, and favors the former over the latter in resource allocation. Our results indicate that making individuals? hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent. This leads to a leftward shift of their earnings distribution – the proportion of rural migrants below the 25th earnings percentile increases significantly by almost 19 percentage points. However, among non-migrants the proportion with earnings below the 25th percentile drops by 5 percentage points, and the proportion above the 75th percentile increases by almost 8 percentage points, albeit insignificantly. The results demonstrate the impact of institutionally imposed social identity on individuals? intrinsic response to incentives, and consequently on widening income inequality.

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Bibliographic Info

Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 190.

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Length: 51 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:cde:cdewps:190

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Keywords: social identity; hukou; inequality; field experiment; China;

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Blog mentions

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  1. If you pay peanuts . . . Part Two (self fulfilling prophecy edition): if you treat people badly, you get the worst out of them
    by Nicholas Gruen in Club Troppo on 2012-04-07 07:00:41
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Cited by:
  1. Weng, Qian, 2013. "Session Size and its Effect on Identity Building: Evidence from a public goods experiment," Working Papers in Economics 560, University of Gothenburg, Department of Economics.
  2. Hoff, Karla & Pandey, Priyanka, 2014. "Making up people—The effect of identity on performance in a modernizing society," Journal of Development Economics, Elsevier, vol. 106(C), pages 118-131.
  3. Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
  4. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
  5. Liu, Elaine M. & Meng, Juanjuan & Wang, Joseph Tao-yi, 2013. "Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China," IZA Discussion Papers 7684, Institute for the Study of Labor (IZA).
  6. Uwe Dulleck & Jonas Fooken & Yumei He, 2012. "Public Policy and Individual Labor Market Discrimination: An Artefactual Field Experiment in China," QuBE Working Papers 002, QUT Business School.
  7. Binkai Chen & Ming Lu & Ninghua Zhong, 2012. "Hukou and Consumption Heterogeneity: Migrants' Expenditure Is Depressed by Institutional Constraints in Urban China," Global COE Hi-Stat Discussion Paper Series gd11-221, Institute of Economic Research, Hitotsubashi University.
  8. Stuart Cameron & UNICEF Innocenti Research Centre, 2012. "Education, Urban Poverty and Migration: Evidence from Bangladesh and Vietnam," Innocenti Working Papers inwopa679, UNICEF Innocenti Research Centre.
  9. Daniel John Zizzo, 2012. "Inducing natural group identity: A RDP analysis," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 12-01, School of Economics, University of East Anglia, Norwich, UK..
  10. Catherine Eckel & Philip Grossman & Cathleen Johnson & Angela Oliveira & Christian Rojas & Rick Wilson, 2012. "School environment and risk preferences: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 45(3), pages 265-292, December.
  11. Hoff, Karla & Pandey, Priyanka, 2012. "Making up people -- the effect of identity on preferences and performance in a modernizing society," Policy Research Working Paper Series 6223, The World Bank.

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