Role of Individual Social Capital in Wage Determination: Evidence from China

• Author: Yang Liu
• DOI: http://doi.org/10.1111/asej.12122
• Published date: 01 September 2017
• Date: 01 September 2017

Role of Individual Social Capital in Wage

Determination: Evidence from China*

Yang Liu

Received 18 December 2015; accepted 30 March 2017

The present study examines the role of individual-level social capital in workers’

wage determination in a Nash-bargaining wage model using Chinese micro-level

data. The study finds a significant contribution of individual-specific social capital

to the wage level. In particular, larger individual social networks and workers’

positive attitudes toward social capital significantly increase the wage level. More-

over, the effect of social capital on the wage level is much larger for men than for

women. The results indicate that construction of individual social capital could

increase workers’wages. However, efforts are needed to reduce the unequal con-

tributions of social capital between men and women.

Keywords: gender gap, individual social capital, wage determination.

JEL classification codes: I00, J31.

doi: 10.1111/asej.12122

I. Introduction

In recent years, some policies have encouraged the establishment of social capi-

tal to address poverty and well-being issues (OECD, 2001; OECD, 2002; Cabi-

net Office, 2003). At the societal level, social capital is considered to be

‘networks together with shared norms, values and understandings that facilitate

cooperation within or among groups’(OECD, 2001). At the individual level,

social capital refers to a system of interpersonal networks (Dasgupta, 2003;

Munasib, 2007). The role of social networks in labor markets has received much

attention in recent years. Many sociological studies have provided evidence that

social networks help people to find jobs or influence their career success

*Liu: Research Institute of Economy,Trade and Industry, IAA, Japan, 11th floor, Annex, Ministry

of Economy, Trade and Industry (METI), 1-3-1, Kasumigaseki Chiyoda-ku, Tokyo 100-8901, Japan.

Email: liu-yang@rieti.go.jp. The author is grateful to the anonymous referees, Yano Makoto, Fujita

Masahisa, Morikawa Masayuki and Konishi Yoko for their helpful comments. This study is a part of

the research results from RIETI. Data analyzed in this study were collected by the research project

‘China General Social Survey’conducted by the Department of Sociology, Renmin University of

China and the Social Science Division, Hong Kong Science and Technology University, directed by

Drs Li Lulu and Bian Yanjie, and sponsored by the China Social Science Foundation. The author

appreciates the assistance in providing data by the aforementioned institutes and individuals. The

views expressed herein are the author’s own.

© 2017 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Asian Economic Journal 2017, Vol.31 No. 3, 239–252 239