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Economic Returns to Communist Party Membership: Evidence from Urban Chinese Twins

  • Li, Hongbin


    (Tsinghua University)

  • Liu, Pak-Wai


    (Chinese University of Hong Kong)

  • Zhang, Junsen


    (Chinese University of Hong Kong)

  • Ma, Ning


    (Johns Hopkins University)

This paper estimates the returns to membership of the Chinese Communist Party using unique twins data we collected from China. Our OLS estimate shows that being a Party member increases earnings by 10%, but the within-twin-pair estimate becomes zero. One interpretation of these results is that the OLS Party premium is due to omitted ability and family background. This interpretation would suggest that Party members fare well not because of their special political status per se, but because of the superior ability that made them Party members. The estimates are also consistent with an alternative interpretation that Party membership not only has its own effect but also has an external effect on the sibling.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2118.

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Length: 28 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2118
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  1. Agrawal, Anup & Knoeber, Charles R, 2001. "Do Some Outside Directors Play a Political Role?," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 179-98, April.
  2. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  3. Neumark, David, 1999. "Biases in twin estimates of the return to schooling," Economics of Education Review, Elsevier, vol. 18(2), pages 143-148, April.
  4. Simon Johnson & Todd Mitton, 2001. "Cronyism and Capital Controls: Evidence from Malaysia," NBER Working Papers 8521, National Bureau of Economic Research, Inc.
  5. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  6. repec:oup:qjecon:v:120:y:2005:i:4:p:1371-1411 is not listed on IDEAS
  7. repec:oup:qjecon:v:113:y:1998:i:1:p:253-284 is not listed on IDEAS
  8. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  9. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
  10. Bound, John & Solon, Gary, 1999. "Double trouble: on the value of twins-based estimation of the return to schooling," Economics of Education Review, Elsevier, vol. 18(2), pages 169-182, April.
  11. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2005. "Why Do Entrepreneurs Enter Politics?," Discussion Papers 00009, Chinese University of Hong Kong, Department of Economics.
  12. Liu, Zhiqiang, 2003. "The Economic Impact and Determinants of Investment in Human and Political Capital in China," Economic Development and Cultural Change, University of Chicago Press, vol. 51(4), pages 823-49, July.
  13. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 559-578, July.
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