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Economic Returns to Communist Party Membership: Evidence from Urban Chinese Twins

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  • Li, Hongbin

    ()
    (Tsinghua University)

  • Liu, Pak-Wai

    ()
    (Chinese University of Hong Kong)

  • Zhang, Junsen

    ()
    (Chinese University of Hong Kong)

  • Ma, Ning

    ()
    (Johns Hopkins University)

Abstract

This paper estimates the returns to membership of the Chinese Communist Party using unique twins data we collected from China. Our OLS estimate shows that being a Party member increases earnings by 10%, but the within-twin-pair estimate becomes zero. One interpretation of these results is that the OLS Party premium is due to omitted ability and family background. This interpretation would suggest that Party members fare well not because of their special political status per se, but because of the superior ability that made them Party members. The estimates are also consistent with an alternative interpretation that Party membership not only has its own effect but also has an external effect on the sibling.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2118.

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Length: 28 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2118

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Keywords: twins; communist party membership; China;

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References

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  1. Simon Johnson & Todd Mitton, 2001. "Cronyism and Capital Controls: Evidence from Malaysia," NBER Working Papers 8521, National Bureau of Economic Research, Inc.
  2. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 369-386, March.
  3. John Bound & Gary Solon, 1998. "Double Trouble: On the Value of Twins-Based Estimation of the Return to Schooling," NBER Working Papers 6721, National Bureau of Economic Research, Inc.
  4. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  5. Liu, Zhiqiang, 2003. "The Economic Impact and Determinants of Investment in Human and Political Capital in China," Economic Development and Cultural Change, University of Chicago Press, vol. 51(4), pages 823-49, July.
  6. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(4), pages 1371-1411, November.
  7. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2005. "Why Do Entrepreneurs Enter Politics?," Discussion Papers, Chinese University of Hong Kong, Department of Economics 00009, Chinese University of Hong Kong, Department of Economics.
  8. Neumark, David, 1999. "Biases in twin estimates of the return to schooling," Economics of Education Review, Elsevier, Elsevier, vol. 18(2), pages 143-148, April.
  9. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 1095-1102, September.
  10. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, Elsevier, vol. 87(2), pages 283-299, October.
  11. Orley Ashenfelter & Cecilia Rouse, 1997. "Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins," NBER Working Papers 6106, National Bureau of Economic Research, Inc.
  12. Agrawal, Anup & Knoeber, Charles R, 2001. "Do Some Outside Directors Play a Political Role?," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 44(1), pages 179-98, April.
  13. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 44(3), pages 559-578, July.
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Cited by:
  1. Xin Meng, 2007. "Wealth Accumulation and Distribution in Urban China," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 761-791.
  2. Mark Rosenzweig & Junsen Zhang, 2014. "Co-residence, Life-Cycle Savings and Inter- Generational Support in Urban China," Working Papers, Economic Growth Center, Yale University 1039, Economic Growth Center, Yale University.
  3. Zhang, Jian & Giles, John T. & Rozelle, Scott, 2012. "Does It Pay to Be a Cadre? Estimating the Returns to Being a Local Official in Rural China," IZA Discussion Papers 6653, Institute for the Study of Labor (IZA).
  4. Heywood, John S. & Siebert, W. Stanley & Wei, Xiangdong, 2009. "Job Satisfaction and the Labor Market Institutions in Urban China," IZA Discussion Papers 4254, Institute for the Study of Labor (IZA).
  5. Simon Appleton & John Knight & Lina Song & Qingjie Xia, 2009. "The Economics of Communist Party Membership: The Curious Case of Rising Numbers and Wage Premium during China's Transition," Journal of Development Studies, Taylor & Francis Journals, vol. 45(2), pages 256-275.
  6. Suchuan Zhang, 2014. "Impact of Job Involvement on Organizational Citizenship Behaviors in China," Journal of Business Ethics, Springer, Springer, vol. 120(2), pages 165-174, March.
  7. Li, Hongbin & Rosenzweig, Mark & Zhang, Junsen, 2008. "Altruism, Favoritism, and Guilt in the Allocation of Family Resources: Sophie's Choice in Mao's Mass Send Down Movement," Working Papers, Yale University, Department of Economics 54, Yale University, Department of Economics.
  8. Li, Hongbin & Meng, Lingsheng & Shi, Xinzheng & Wu, Binzhen, 2012. "Does having a cadre parent pay? Evidence from the first job offers of Chinese college graduates," Journal of Development Economics, Elsevier, Elsevier, vol. 99(2), pages 513-520.
  9. He, Xiaobo, 2013. "Wages and Access to International Markets: Evidence from Urban China," MPRA Paper 44537, University Library of Munich, Germany.
  10. Huang, Wei & Lei, Xiaoyan & Zhao, Yaohui, 2014. "One-Child Policy and the Rise of Man-Made Twins," IZA Discussion Papers 8394, Institute for the Study of Labor (IZA).
  11. Ming Lu & Jianzhi Zhao, 2009. "The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd08-019, Institute of Economic Research, Hitotsubashi University.
  12. Guggiola Gabriele, 2009. "A Political Economy Perspective of the Chinese Government Tactical Behavior," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 200908, University of Turin.
  13. Yao, Yang, 2014. "The Chinese Growth Miracle," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 943-1031 Elsevier.

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