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Social Identity and Inequality--The Impact of China’s Hukou System

Farzana Afridi, Sherry Xin Li and Ren Yufei
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Sherry Xin Li: School of Economic, Political and Policy Sciences (EPPS) University of Texas at Dallas, GR31

No 190, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: We conduct an experimental study to investigate the causal impact of social identity on individuals? response to economic incentives. We focus on China?s decades old household registration system, or the hukou institution, which categorizes citizens into urban and rural residents, and favors the former over the latter in resource allocation. Our results indicate that making individuals? hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent. This leads to a leftward shift of their earnings distribution – the proportion of rural migrants below the 25th earnings percentile increases significantly by almost 19 percentage points. However, among non-migrants the proportion with earnings below the 25th percentile drops by 5 percentage points, and the proportion above the 75th percentile increases by almost 8 percentage points, albeit insignificantly. The results demonstrate the impact of institutionally imposed social identity on individuals? intrinsic response to incentives, and consequently on widening income inequality.

Keywords: social identity; hukou; inequality; field experiment; China (search for similar items in EconPapers)
JEL-codes: C93 D03 O15 P36 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2010-10
New Economics Papers: this item is included in nep-exp, nep-mig, nep-soc, nep-tra and nep-ure
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Related works:
Journal Article: Social identity and inequality: The impact of China's hukou system (2015) Downloads
Working Paper: Social Identity and Inequality: The Impact of China's Hukou System (2012) Downloads
Working Paper: Social Identity and Inequality: The Impact of China's Hokou System (2010) Downloads
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