It Pays to Have Guanxi: Social Networks and Household Income in China
48 Pages Posted: 12 Aug 2020 Last revised: 24 Feb 2021
Date Written: February 24, 2021
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
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