It Pays to Have Guanxi: How Social Capital Affects Household Income in China
28 Pages Posted: 12 Aug 2020 Last revised: 16 May 2022
Date Written: April 6, 2022
The association between social capital and household income receives inadequate attention over the past decade. We examine the role of social capital in household income using three waves of household surveys from 2011 to 2015 in China. We find that gift expenditure as a proxy for social capital is positively associated with total household income. In addition, social capital mainly affects income sources through improved financial sophistication, higher job position levels, closer government connections, and greater accessibility to operating loans. The results remain intact after addressing endogeneity issues and are robust to alternative social capital measures. The findings highlight the importance of social capital in household economic welfare in China.
Keywords: social network; household income; gift expenditure
JEL Classification: D3, D7, O1
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