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

Author

Listed:
  • Baltagi, Badi H.

    () (Syracuse University)

  • Deng, Ying

    () (School of International Trade and Economics, Beijing)

  • Ma, Xiangjun

    () (School of International Trade and Economics, Beijing)

Abstract

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.

Suggested Citation

  • Baltagi, Badi H. & Deng, Ying & Ma, Xiangjun, 2017. "Network Effects on Labor Contracts of Internal Migrants in China: A Spatial Autoregressive Model," IZA Discussion Papers 10926, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10926
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    References listed on IDEAS

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    More about this item

    Keywords

    contract; co-villager network; spatial autoregressive logit model; internal migrants;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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