Does Communist Party Membership Pay? Estimating the Economic Returns to Party Membership in the Labor Market in China

Abstract

Many studies have found that Chinese Communist Party membership brings economic benefits to party members, but some studies also argue that the premium associated with party membership is merely due to members’ higher levels of ability and advantageous family backgrounds. The lack of consensus on the economic returns of party membership implies that the role of party membership is not well understood. This study estimates the economic returns to Chinese Communist Party membership using complementary approaches to address the endogeneity of party membership status: propensity score matching and instrumental variable. Although the magnitudes of these estimates vary across estimators, all the estimates show positive economic returns to party membership. This paper also examines possible mechanisms for how party membership may bring benefits to members and provides evidence that party membership may generate political capital, but not social capital in the labor market in China.

Keywords: Chinese Communist Party membership, economic returns, wage premium, Chinese labor market, political capital, social capital

JEL Classification: O10, O53, J00