Social Enterprise

Social Networks And Labor Market Entry Barriers: Understanding Inter-Industrial Wage Differentials In Urban China

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Executive Summary

An entry barrier in the labor market can be an important source of wage inequality. This paper finds that social networks, father's education and political status, and urban household registration status (hukou identity), as well as their own education, experience, age, and gender, help people enter high-wage industries. When contrasting coastal and inland samples, after instrumenting social networks by household political identity (based on classifications during the land reform in the 1950s), the authors find that social networks are more helpful for entering high-wage industries. The implication of this paper is: breaking industrial entry barriers in the urban labor market is an essential policy in order to control inter-industrial wage inequality in urban China.

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