Network Effects on Labor Contracts of Internal Migrants in China- A Spatial Autoregressive Model
Contract, Co-Villager Network, Spatial Autoregressive Logit Model, Internal Migrants, Labor, Wages, Mini Labor Union
Working Papers Series
Economics | Labor Economics | Macroeconomics | Work, Economy and Organizations
This paper studies the fact that 37 percent of the internal migrants in China do not sign a labor contract with their employers, as revealed in a nationwide survey. These contract-free jobs pay lower hourly wages, require longer weekly work hours, and provide less insurance or on-the-job training than regular jobs with contracts. We find that the co-villager networks play an important role in a migrant’s decision on whether to accept such insecure and irregular jobs. By employing a comprehensive nationwide survey in 2011 in the spatial autoregressive logit model, we show that the common behavior of not signing contracts in the co-villager network increases the probability that a migrant accepts a contract-free job. We provide three possible explanations on how networks influence migrants’ contract decisions: job referral mechanism, limited information on contract benefits, and the "mini labor union" formed among co-villagers, which substitutes for a formal contract. In the sub-sample analysis, we also find that the effects are larger for migrants whose jobs were introduced by their co-villagers, male migrants, migrants with rural Hukou, short-term migrants, and less educated migrants. The heterogeneous effects for migrants of different employer types, industries, and home provinces provide policy implications.
Baltagi, Badi H.; Deng, Ying; and Ma, Xiangjun, "Network Effects on Labor Contracts of Internal Migrants in China- A Spatial Autoregressive Model" (2017). Center for Policy Research. 242.
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Working paper no. 207
This project is supported by National Natural Science Foundation of China , ,  and Beijing Social Science Funding [15JGC158]. All errors are the responsibility of the authors. They would like to thank the guest editor Harry Kelejian, and an anonymous referee. In addition, Henk Folmer for their constructive comments and suggestions.