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Social Networks and Labor Market Entry Barriers: Understanding Inter-industrial Wage Differentials in Urban China

  • Zhao Chen
  • Ming Lu
  • Hiroshi Sato

An entry barrier in the labor market can be an important source of wage inequality. This paper finds that social networks, father's education and political status, and urban household registration status (hukou identity), as well as their own education, experience, age, and gender, help people enter high-wage industries. When contrasting coastal and inland samples, after instrumenting social networks by household political identity (based on classifications during the land reform in the 1950s), we find that social networks are more helpful for entering high-wage industries. The implication of this paper is: breaking industrial entry barriers in the urban labor market is an essential policy in order to control inter-industrial wage inequality in urban China.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-084.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 gd09-084.

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Date of creation: Sep 2009
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Handle: RePEc:hst:ghsdps:gd09-084
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  1. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," IZA Discussion Papers 2642, Institute for the Study of Labor (IZA).
  2. Paul Chen & Per-Anders Edin, 2002. "Efficiency Wages and Industry Wage Differentials: A Comparison Across Methods of Pay," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 617-631, November.
  3. Zhao Chen & Ming Lu & Guanghua Wan, 2010. "Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality," Global COE Hi-Stat Discussion Paper Series gd09-130, Institute of Economic Research, Hitotsubashi University.
  4. Björklund, Anders & Bratsberg, Bernt & Eriksson, Tor & Jäntti, Markus & Raaum, Oddbjørn, 2004. "Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries," IZA Discussion Papers 1080, Institute for the Study of Labor (IZA).
  5. Meng, Xin & Zhang, Junsen, 2001. "The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 485-504, September.
  6. J. S. Arbache, 2001. "Wage Differentials in Brazil: Theory and Evidence," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 109-130.
  7. Sato, Hiroshi & Li, Shi, 2007. "Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth," IZA Discussion Papers 3223, Institute for the Study of Labor (IZA).
  8. Lukiyanova Anna, 2006. "Wage Inequality in Russia (1994–2003)," EERC Working Paper Series 06-03e, EERC Research Network, Russia and CIS.
  9. Haisken-DeNew, John P. & Schmidt, Christoph M., 1999. "Industry Wage Differentials Revisited: A Longitudinal Comparison of Germany and USA (1984-1996)," IZA Discussion Papers 98, Institute for the Study of Labor (IZA).
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