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The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison

  • Ming Lu
  • Jianzhi Zhao
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    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.

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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-019.pdf
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    Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-019.

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    Date of creation: Jan 2009
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    Handle: RePEc:hst:ghsdps:gd08-019
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    12. repec:cup:cbooks:9780521497695 is not listed on IDEAS
    13. Fields, Gary S & Yoo, Gyeongjoon, 2000. "Falling Labor Income Inequality in Korea's Economic Growth: Patterns and Underlying Causes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 139-59, June.
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    16. 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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