The Role of Social Capital in the Labour Market in China

John Knight and Linda Yueh

No 121, Economics Series Working Papers from University of Oxford, Department of Economics

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.

Keywords: labour markets; wages; social capital; social networks; China (search for similar items in EconPapers)
JEL-codes: J30 J40 (search for similar items in EconPapers)
Date: 2002-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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