Social Identity and Inequality: The Impact of China's Hukou System

41 Pages Posted: 25 Mar 2012

See all articles by Farzana Afridi

Farzana Afridi

Indian Statistical Institute, Delhi

Sherry Xin Li

University of Texas at Dallas

Yufei Ren

Union College

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 household registration (hukou) system which favors urban residents and discriminates against rural residents 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, which leads to a significant leftward shift of their earnings distribution. 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, inequality, field experiment, hukou, China

JEL Classification: C93, D03, O15, P36

Suggested Citation

Afridi, Farzana and Li, Sherry Xin and Ren, Yufei, Social Identity and Inequality: The Impact of China's Hukou System. IZA Discussion Paper No. 6417. Available at SSRN: https://ssrn.com/abstract=2028297

Farzana Afridi (Contact Author)

Indian Statistical Institute, Delhi ( email )

7, S.J.S. Sansanwal Marg
New Delhi
India

Sherry Xin Li

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Yufei Ren

Union College ( email )

Schenectady, NY 12308-3151
United States

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