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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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Listed:
  • 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.

Suggested Citation

  • 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 gd08-019, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd08-019
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    References listed on IDEAS

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    More about this item

    Keywords

    Social Network; Income Inequality; Marketization; Regression-Based Decomposition;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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