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The Economics of Communist Party Membership: The Curious Case of Rising Numbers and Wage Premium during China’s Transition

Author

Listed:
  • Appleton, Simon

    (University of Nottingham)

  • Knight, John

    (University of Oxford)

  • Song, Lina

    (University of Nottingham)

  • Xia, Qingjie

    (Peking University)

Abstract

Why is it that, as the Chinese Communist Party has loosened its grip, abandoned its core beliefs, and marketized the economy, its membership has risen markedly along with the economic benefits of joining? We use three national household surveys, spanning eleven years, to answer this question with respect to labour market rewards in urban China. We conceptualize individual demand for Party membership as an investment in “political capital” that brings monetary rewards in terms of higher wages. This wage premium has risen with the growing wage differentials associated with the emergence of a labour market and the continuing value of political status in the semi-marketized transitional economy. However, a demand-side explanation does not explain the fact that the wage premium is higher for the personal characteristics that reduce the probability of membership. We develop an explanation in terms of a rationing of places and a scarcity value for members with those characteristics.

Suggested Citation

  • Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2008. "The Economics of Communist Party Membership: The Curious Case of Rising Numbers and Wage Premium during China’s Transition," IZA Discussion Papers 3454, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3454
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    References listed on IDEAS

    as
    1. Hongbin Li & Pak Wai Liu & Ning Ma & Junsen Zhang, 2005. "Economic Returns to Communist Party Membership: Evidence from Chinese Twins," Discussion Papers 00015, Chinese University of Hong Kong, Department of Economics.
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    3. Hongbin Li & PakWai Liu & Junsen Zhang & Ning Ma, 2007. "Economic Returns to Communist Party Membership: Evidence From Urban Chinese Twins," Economic Journal, Royal Economic Society, vol. 117(523), pages 1504-1520, October.
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    5. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-1173, December.
    6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
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    More about this item

    Keywords

    economic transition; wages; labour market; Communist Party; China;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General

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