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The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison

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Author Info
Ming Lu
Jianzhi Zhao
Abstract

This study aims to quantify the contribution of social networks, i.e., guanxi,to income inequality in rural households in China. One purpose is to understand how this influence varies across regions with different levels of marketization and economic development. Employing household survey data in rural China, we find that social networks contribute 12.1%-13.4% to income inequality among households in rural China, ranking fourth after village identifiers, nonfarm employment, and education. We also find that social networks exert a greater impact on income and a greater contribution to income inequality in Eastern China, compared with Middle-Western China where economic development is relatively slower. Our findings challenge the conventional understanding that social capital is the capital of the poor. In other words,the rich get richer in richer regions through social networks.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-019.

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Date of creation: Jan 2009
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Handle: RePEc:hst:ghsdps:gd08-019

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Related research
Keywords: Social Network; Income Inequality; Marketization; Regression-Based Decomposition;

Find related papers by JEL classification:
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health, Education, Welfare, and Poverty

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