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Network Effects on Labor Contracts of Internal Migrants in China: A Spatial Autoregressive Model

Listed author(s):
  • Baltagi, Badi H.

    ()

    (Syracuse University)

  • Deng, Ying

    ()

    (School of International Trade and Economics, Beijing)

  • Ma, Xiangjun

    ()

    (School of International Trade and Economics, Beijing)

Registered author(s):

    This paper studies the fact that 37 percent of the internal migrants in China do not sign a labor contract with their employers, as revealed in a nationwide survey. These contract-free jobs pay lower hourly wages, require longer weekly work hours, and provide less insurance or on-the-job training than regular jobs with contracts. We find that the co-villager networks play an important role in a migrant's decision on whether to accept such insecure and irregular jobs. By employing a comprehensive nationwide survey in 2011 in the spatial autoregressive logit model, we show that the common behavior of not signing contracts in the co-villager network increases the probability that a migrant accepts a contract-free job. We provide three possible explanations on how networks influence migrants' contract decisions: job referral mechanism, limited information on contract benefits, and the "mini labor union" formed among co-villagers, which substitutes for a formal contract. In the sub-sample analysis, we also find that the effects are larger for migrants whose jobs were introduced by their co-villagers, male migrants, migrants with rural Hukou, short-term migrants, and less educated migrants. The heterogeneous effects for migrants of different employer types, industries, and home provinces provide policy implications.

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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10926.

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    Length: 32 pages
    Date of creation: Jul 2017
    Handle: RePEc:iza:izadps:dp10926
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