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How Do Heterogeneous Social Interactions Affect the Peer Effect in Rural-Urban Migration?: Empirical Evidence from China

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  • Zhao Chen
  • Shiqing Jiang
  • Ming Lu
  • Hiroshi Sato

Abstract

In this paper, we use the "2002 Chinese Household Income Project Survey" (CHIP2002) data to examine how heterogeneous social interactions affect the peer effect in the rural-urban migration decision in China. We find that the peer effect, measured by the village migration ratio, significantly increases the individual probability of outward migration. We also find that the magnitude of the peer effect is nonlinear, depending on the strength and type of social interactions with other villagers. Interactions in information sharing can increase the magnitude of the peer effect, while interactions in mutual help in labor activities, such as help in housing construction, nursing and farm work in busy seasons, will impede the positive role of the peer effect. Being aware of the simultaneity bias caused by the two-way causality between social interaction strengths and migration, we utilize "historical family political identity in land reform" as an instrumental variable for social interactions. However, the hypothesis that probit and instrumental-variable probit results are not significantly different is not rejected. The existence of a nonlinear peer effect has rich policy implications. For policy makers to encourage rural-urban migration, it is feasible to increase education investment in rural areas or increase information sharing among rural residents. However, only an increase in the constant term in the regression, i.e., a "big push" in improving institutions for migration, can help rural Chinese residents escape the low equilibrium in migration.

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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-008.

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Date of creation: Oct 2008
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Handle: RePEc:hst:ghsdps:gd08-008

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Keywords: labor migration; urbanization; peer effect; social interaction; social multiplier;

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References

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  1. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Department of Economics, Bar-Ilan University.
  2. Wan, Guanghua & Lu, Ming & Chen, Zhao, 2006. "The inequality-growth nexus in the short and long run: Empirical evidence from China," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 654-667, December.
  3. Zhang, Xiaobo & Li, Guo, 2003. "Does guanxi matter to nonfarm employment?," Journal of Comparative Economics, Elsevier, vol. 31(2), pages 315-331, June.
  4. Alberto Alesina & Paola Giuliano, 2007. "The Power of the Family," NBER Working Papers 13051, National Bureau of Economic Research, Inc.
  5. Patacchini, Eleonora & Zenou, Yves, 2009. "Juvenile Delinquency and Conformism," CEPR Discussion Papers 7565, C.E.P.R. Discussion Papers.
  6. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," Discussion Papers 2006-19, Graduate School of Economics, Hitotsubashi University.
  7. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2004. "Who's Who in Networks. Wanted: The Key Player," Working Papers 178, Barcelona Graduate School of Economics.
  8. Weili Ding & Steven F. Lehrer, 2006. "Do Peers Affect Student Achievement in China's Secondary Schools?," NBER Working Papers 12305, National Bureau of Economic Research, Inc.
  9. Antoni Calvo-Armengol & Eleonora Patacchini & Yves Zenou, 2008. "Peer Effects and Social Networks in Education," CReAM Discussion Paper Series 0814, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  10. Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2005. "Peer Effects and Social Networks in Education and Crime," CEPR Discussion Papers 5244, C.E.P.R. Discussion Papers.
  11. Bauer, Thomas K. & Epstein, Gil S. & Gang, Ira N., 2002. "Herd Effects or Migration Networks? The Location Choice of Mexican Immigrants in the U.S," IZA Discussion Papers 551, Institute for the Study of Labor (IZA).
  12. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  13. Giulio Zanella, 2004. "Social Interactions and Economic Behavior," Department of Economics University of Siena 441, Department of Economics, University of Siena.
  14. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  15. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
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Cited by:
  1. Hiroshi Sato, 2009. "Growth of Villages in China, 1990-2002," Global COE Hi-Stat Discussion Paper Series gd08-023, Institute of Economic Research, Hitotsubashi University.
  2. Shiqing Jiang & Ming Lu & Hiroshi Sato, 2009. "Happiness in the Dual Society of Urban China: Hukou Identity, Horizontal Inequality and Heterogeneous," Global COE Hi-Stat Discussion Paper Series gd08-020, Institute of Economic Research, Hitotsubashi University.

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