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Social-Family Network and Self-Employment: Evidence from Temporary Rural-Urban Migrants in China

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  • Zhang, Junfu

    ()
    (Clark University)

  • Zhao, Zhong

    ()
    (Renmin University of China)

Abstract

We hypothesize that individuals with a larger social-family network are more likely to choose self-employment. We test this hypothesis using data on temporary rural-urban migrants in China. The size of a migrant’s social-family network is measured by the number of relatives and friends this migrant greeted during the past Spring Festival. Our empirical analysis faces two challenges. First, there is an endogeneity problem in that a migrant may want to develop and maintain a large social-family network exactly because he is self-employed. For this reason, a simple correlation between the probability of being self-employed and the size of the migrant’s social-family network cannot be interpreted as causal. Second, the size of the social-family network is measured using survey data, which is subject to measurement error. To overcome these problems, we take an instrumental variable (IV) approach. More specifically, we examine the distance an individual migrated when he first moved to a city and use this variable to instrument for the current size of the social-family network. We establish the credibility of the IV by emphasizing the unique institutional context of rural-urban migration in China and focusing on the sample of migrants who originally started as wage workers in urban areas and currently are not in their first jobs. Our IV results indeed show that a rural-urban migrant with a larger social-family network is more likely to be self-employed in the city. This finding is robust to alternative model specifications and various restrictions on the sample used in estimation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5446.

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Length: 47 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5446

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Keywords: social-family network; self-employment; rural-urban migrants;

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References

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Citations

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Cited by:
  1. Escudero, Verónica & López Mourelo, Elva, 2013. "Understanding the drivers of the youth labour market in Kenya," ILO Working Papers, International Labour Organization 485514, International Labour Organization.
  2. Giulietti, Corrado & Ning, Guangjie & Zimmermann, Klaus F, 2011. "Self-employment of rural-to-urban migrants in China," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8473, C.E.P.R. Discussion Papers.
  3. Cui, Yuling & Nahm, Daehoon & Tani, Massimiliano, 2013. "Self-Employment in China: Are Rural Migrant Workers and Urban Residents Alike?," IZA Discussion Papers 7191, Institute for the Study of Labor (IZA).
  4. Mehtap Akgüç & Corrado Giulietti & Klaus Zimmermann, 2014. "The RUMiC longitudinal survey: fostering research on labor markets in China," IZA Journal of Labor & Development, Springer, Springer, vol. 3(1), pages 1-14, December.
  5. Zhang, Junfu & Zhao, Zhong, 2013. "Measuring the Income-Distance Tradeoff for Rural-Urban Migrants in China," IZA Discussion Papers 7160, Institute for the Study of Labor (IZA).

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