It Pays to Have Guanxi: How Social Capital Affects Household Income in China

28 Pages Posted: 12 Aug 2020 Last revised: 16 May 2022

See all articles by Kai Wu

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Yifan Xu

Central University of Finance and Economics (CUFE) - School of Finance

He Sun

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: April 6, 2022

Abstract

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

Suggested Citation

Wu, Kai and Xu, Yifan and Sun, He, It Pays to Have Guanxi: How Social Capital Affects Household Income in China (April 6, 2022). Available at SSRN: https://ssrn.com/abstract=3649302 or http://dx.doi.org/10.2139/ssrn.3649302

Kai Wu (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Yifan Xu

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

He Sun

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

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