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The Role of Social Capital in the Labour Market in China

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  • John Knight
  • Linda Yueh

Abstract

Social capital is thought to play an economic role in the labour market. It may be particularly pertinent in one that is in transition from an administered to a market-oriented system. One factor that may determine success in the underdeveloped Chinese labour market is thus guanxi, the Chinese variant of social capital. With individual-level measures of social capital, we test for the role of guanxi using a data set designed for this purpose, covering 7,500 urban workers and conducted in early 2000. The basic hypothesis is supported. Both measures of social capital - size of social network and Communist Party membership - have significant and substantial effects in the income functions. Indeed, social capital may be just as important as human capital: remarkably, one additional reported contact contributes more than one additional year of education. Social capital can have influence either in an administered system or in one subject to market forces. We find that it does so in both parts of the labour market, but some of the evidence suggests that it is more important in the latter.

Suggested Citation

  • John Knight & Linda Yueh, 2002. "The Role of Social Capital in the Labour Market in China," Economics Series Working Papers 121, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:121
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    References listed on IDEAS

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    Cited by:

    1. Jiang, Shiqing & Lu, Ming & Sato, Hiroshi, 2012. "Identity, Inequality, and Happiness: Evidence from Urban China," World Development, Elsevier, vol. 40(6), pages 1190-1200.
    2. Wang, Xiaobing & Herzfeld, Thomas & Glauben, Thomas, 2007. "Labor allocation in transition: Evidence from Chinese rural households," China Economic Review, Elsevier, vol. 18(3), pages 287-308.
    3. Wang, Ruixin, 2015. "Essays on development economics and public economics," Other publications TiSEM e1779514-5b71-4726-925b-2, Tilburg University, School of Economics and Management.
    4. Yongqin Wang & Ming Li, 2009. "Costs and Benefits of Relational Contracting in China’s Transition," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(3), pages 693-709, October.
    5. Lorraine Watkins-Mathys, 2006. "Focus group interviewing in China: Language, culture, and sensemaking," Journal of International Entrepreneurship, Springer, vol. 4(4), pages 209-226, December.
    6. John Knight, 2014. "Inequality in China: An Overview," The World Bank Research Observer, World Bank, vol. 29(1), pages 1-19.
    7. Glauben, Thomas & Herzfeld, Thomas & Wang, Xiaobing, 2005. "Labor Market Participation of Chinese Agricultural Households," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24516, European Association of Agricultural Economists.
    8. Yogo, Urbain Thierry, 2009. "Le Capital Social: Entre Evidences Théoriques et Balbutiemments Empiriques [Social Capital: Theoretical Evidence and empirical issues]," MPRA Paper 19441, University Library of Munich, Germany.
    9. Yu Shen & Di Gao & Di Bu & Lina Yan & Ping Chen, 2019. "CEO hometown ties and tax avoidance‐evidence from China's listed firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1549-1580, March.
    10. Wang, Xiaobing, 2007. "Labor market behavior of Chinese rural households during transition," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 42, number 92321.
    11. Shuang LI & Ming LU & Hiroshi Sato, 2008. "The Value of Power in China: How Do Party Membership and Social Networks Affect Pay in Different Ownership Sectors?," Global COE Hi-Stat Discussion Paper Series gd08-011, Institute of Economic Research, Hitotsubashi University.
    12. Glauben, Thomas & Herzfeld, Thomas & Wang, Xiaobing, 2008. "Labor market participation of Chinese agricultural households: Empirical evidence from Zhejiang province," Food Policy, Elsevier, vol. 33(4), pages 329-340, August.
    13. Jorg Scheibe, 2003. "The Chinese Output Gap During the Reform Period 1978-2002," Economics Series Working Papers 179, University of Oxford, Department of Economics.
    14. LIU Yang, 2015. "The Role of Individual Social Capital in Wage Determination: Evidence from China," Discussion papers 15133, Research Institute of Economy, Trade and Industry (RIETI).
    15. Ming Lu & Jianzhi Zhao, 2009. "The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison," Global COE Hi-Stat Discussion Paper Series gd08-019, Institute of Economic Research, Hitotsubashi University.
    16. Mehmet KARAÇUKA & Martin LEROCH, 2017. "Institutional and Economic Determinants of Denominational Fractionalism and Schism," Sosyoekonomi Journal, Sosyoekonomi Society, issue 25(33).

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    More about this item

    Keywords

    labour markets; wages; social capital; social networks; China;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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