It Pays to Have Guanxi: Social Networks and Household Income in China

48 Pages Posted: 12 Aug 2020 Last revised: 24 Feb 2021

See all articles by Kai Wu

Kai Wu

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

Seiwai Lai

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

He Sun

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

Date Written: February 24, 2021

Abstract

We examine the role of social networks 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 networks is positively associated with total household income. Social networks' positive impact on property income is stronger among residents in urban areas, while it has a larger impact on salary income, transfer income, and operating income among rural residents. In addition, social networks mainly affect 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 network measures. The findings highlight the importance of social networks in household economic welfare in China.

Keywords: social network; household income; gift expenditure

JEL Classification: D3, D7, O1

Suggested Citation

Wu, Kai and Lai, Seiwai and Sun, He, It Pays to Have Guanxi: Social Networks and Household Income in China (February 24, 2021). 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

Seiwai Lai

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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