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Social Identity and Inequality: The Impact of China's Hukou System

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  • Afridi, Farzana

    (Indian Statistical Institute)

  • Li, Sherry Xin

    (University of Texas at Dallas)

  • Ren, Yufei

    (Union College)

Abstract

We conduct an experimental study to investigate the causal impact of social identity on individuals' response to economic incentives. We focus on China's household registration (hukou) system which favors urban residents and discriminates against rural residents in resource allocation. Our results indicate that making individuals' hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent, which leads to a significant leftward shift of their earnings distribution. The results demonstrate the impact of institutionally imposed social identity on individuals' intrinsic response to incentives, and consequently on widening income inequality.

Suggested Citation

  • Afridi, Farzana & Li, Sherry Xin & Ren, Yufei, 2012. "Social Identity and Inequality: The Impact of China's Hukou System," IZA Discussion Papers 6417, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6417
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    More about this item

    Keywords

    social identity; inequality; field experiment; hukou; China;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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