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

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  • Zhao Chen
  • Ming Lu
  • Hiroshi Sato

Abstract

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.

Suggested Citation

  • Zhao Chen & Ming Lu & Hiroshi Sato, 2009. "Social Networks and Labor Market Entry Barriers: Understanding Inter-industrial Wage Differentials in Urban China," Global COE Hi-Stat Discussion Paper Series gd09-084, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd09-084
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    References listed on IDEAS

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    Cited by:

    1. Mehta, Aashish & Sun, Wei, 2013. "Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis," World Development, Elsevier, vol. 51(C), pages 47-61.
    2. Anthony Rush, 2011. "China's Labour Market," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 29-38, September.
    3. Jason Hung, 2022. "Hukou System Influencing the Structural, Institutional Inequalities in China: The Multifaceted Disadvantages Rural Hukou Holders Face," Social Sciences, MDPI, vol. 11(5), pages 1-18, April.

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    More about this item

    Keywords

    inter-industrial wage differentials; industry monopoly; entry barrier; labor market; social networks; CHIPS data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • Z1 - Other Special Topics - - Cultural Economics

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