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How do Heterogeneous Social Interactions affect the Peer Effect in Rural-Urban Migration?:Empirical Evidence from China

  • Zhao Chen
  • Shiqing Jiang
  • Ming Lu
  • Hiroshi Sato

In this paper, we use the ?002 Chinese Household Income Project Survey?(CHIPS2002) data to examine how heterogeneous social interactions affect the peer effect in the rural-urban migration decision in China. We find that the peer effect, measured by the village migration ratio, significantly increases the individual probability of outward migration. We also find that the magnitude of the peer effect is nonlinear, depending on the strength and type of social interactions with other villagers. Interactions in information sharing can increase the magnitude of the peer effect, while interactions in mutual help in labor activities, such as help in housing construction, nursing and farm work in busy seasons, will impede the positive role of the peer effect. Being aware of the simultaneity bias caused by the two-way causality between social interaction strengths and migration, we utilize "historical family political identity in land reform?as an instrumental variable for social interactions. However, the hypothesis that probit and instrumental-variable probit results are not significantly different is not rejected. The existence of a nonlinear peer effect has rich policy implications. For policy makers to encourage rural-urban migration, it is feasible to increase education investment in rural areas or increase information sharing among rural residents. However, only an increase in the constant term in the regression, i.e. a "big push?in improving institutions for migration, can help rural Chinese residents escape the low equilibrium in migration.

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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 22408.

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Date of creation: 2008
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Handle: RePEc:lic:licosd:22408
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  1. Weili Ding & Steven F. Lehrer, 2006. "Do Peers Affect Student Achievement in China's Secondary Schools?," NBER Working Papers 12305, National Bureau of Economic Research, Inc.
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  3. Antoni Calv�-Armengol & Eleonora Patacchini & Yves Zenou, 2009. "Peer Effects and Social Networks in Education," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1239-1267.
  4. Sato, Hiroshi & Li, Shi, 2007. "Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China," Discussion Papers 2006-19, Graduate School of Economics, Hitotsubashi University.
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  8. Araujo, Caridad & de Janvry, Alain & Sadoulet, Elisabeth, 2004. "Peer Effects in Employment: Results from Mexico's Poor Rural Communities," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt977093fg, Department of Agricultural & Resource Economics, UC Berkeley.
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  15. Alberto Alesina & Paola Giuliano, 2010. "The power of the family," Journal of Economic Growth, Springer, vol. 15(2), pages 93-125, June.
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  17. Eleonora Patacchini & Yves Zenou, 2012. "Juvenile Delinquency and Conformism," Journal of Law, Economics and Organization, Oxford University Press, vol. 28(1), pages 1-31.
  18. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
  19. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  20. Yaohui Zhao, 2003. "The Role of Migrant Networks in Labor Migration: The Case of China," Contemporary Economic Policy, Western Economic Association International, vol. 21(4), pages 500-511, October.
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  23. Bruce Sacerdote & David Marmaros, 2005. "How Do Friendships Form?," NBER Working Papers 11530, National Bureau of Economic Research, Inc.
  24. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
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