Network Effects on Labor Contracts of Internal Migrants in China: A Spatial Autoregressive Model

Posted: 31 Aug 2017

See all articles by Badi H. Baltagi

Badi H. Baltagi

Syracuse University; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics; Syracuse University - Maxwell School of Citizenship and Public Affairs

Xiangjun Ma

University of Virginia - College of Arts and Sciences

Abstract

This paper studies the fact that 37 percent of the internal migrants in China do not sign a labor contract with their employers, as revealed in a nationwide survey. These contract-free jobs pay lower hourly wages, require longer weekly work hours, and provide less insurance or on-the-job training than regular jobs with contracts. We find that the co-villager networks play an important role in a migrant's decision on whether to accept such insecure and irregular jobs. By employing a comprehensive nationwide survey in 2011 in the spatial autoregressive logit model, we show that the common behavior of not signing contracts in the co-villager network increases the probability that a migrant accepts a contract-free job. We provide three possible explanations on how networks influence migrants' contract decisions: job referral mechanism, limited information on contract benefits, and the "mini labor union" formed among co-villagers, which substitutes for a formal contract. In the sub-sample analysis, we also find that the effects are larger for migrants whose jobs were introduced by their co-villagers, male migrants, migrants with rural Hukou, short-term migrants, and less educated migrants. The heterogeneous effects for migrants of different employer types, industries, and home provinces provide policy implications.

Keywords: contract, co-villager network, spatial autoregressive logit model, internal migrants

JEL Classification: O15, R12, J41

Suggested Citation

Baltagi, Badi H. and Ma, Xiangjun, Network Effects on Labor Contracts of Internal Migrants in China: A Spatial Autoregressive Model. IZA Discussion Paper No. 10926, Available at SSRN: https://ssrn.com/abstract=3029796 or http://dx.doi.org/10.2139/ssrn.3029796

Badi H. Baltagi (Contact Author)

Syracuse University ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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IZA Institute of Labor Economics

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Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

400 Eggers Hall
Syracuse, NY 13244
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Xiangjun Ma

University of Virginia - College of Arts and Sciences ( email )

VA
United States

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