The Contribution of Social Networks to Income Inequality in Rural China: A Regression-Based Decomposition and Cross-Regional Comparison

Ming Lu and Jianzhi Zhao

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This study aims to quantify the contribution of social networks, i.e., guanxi,to income inequality in rural households in China. One purpose is to understand how this influence varies across regions with different levels of marketization and economic development. Employing household survey data in rural China, we find that social networks contribute 12.1%-13.4% to income inequality among households in rural China, ranking fourth after village identifiers, nonfarm employment, and education. We also find that social networks exert a greater impact on income and a greater contribution to income inequality in Eastern China, compared with Middle-Western China where economic development is relatively slower. Our findings challenge the conventional understanding that social capital is the capital of the poor. In other words,the rich get richer in richer regions through social networks.

Keywords: Social Network; Income Inequality; Marketization; Regression-Based Decomposition (search for similar items in EconPapers)
JEL-codes: O15 P36 Z13 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cna, nep-dev and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd08-019

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