The impact of job contact networks on wages of rural–urban migrants in China: a switching regression approach^*

Abstract

In nationally representative household data from the 2008 Chinese Rural to Urban Migration Survey, nearly two thirds of rural–urban migrants found their employment through family members, relatives, friends or acquaintances. This paper investigates why the use of social network to find jobs is so prevalent among rural–urban migrants in China, and whether migrants face a wage penalty as a result of adopting this job search method. Using a switch regression approach, we find evidence of positive selection effects of the use of networks on wages. Users of networks tend to be older, to have migrated longer ago and to be less educated. In addition, married workers and those from villages with more out-migrant are more likely to use networks, while those without local residential registration status are less likely. Controlling for selectivity, we find a large negative impact of network use on wages. Using job contacts brings access to urban employment, but at the cost of markedly lower wages.

Keywords:

• Social network
• job contact
• wage
• rural–urban migrant
• switching regression

Notes

* The paper is the revised version based on IZA DP No. 10139.

1. Granovetter (1974) divides job search methods into three groups: formal means, personal contracts, and direction application. He argues direction application that does not use a formal or personal intermediary is different from both formal means and from personal contacts.

2. Liang (2010) use a switching regression model to estimate the effect on wages of using social networks to find jobs in eight cities in China. Their exclusion restriction is to use the square of the age at which workers obtained their jobs in the selection model but not in the wage equations. This exclusion restriction seems a questionable a priori given that they include the linear term for age at which workers obtain their jobs in both the selection and wage equations.