Why Can Social Networks Raise Income?
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| Title | Why Can Social Networks Raise Income?
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| Author | Ma Guangrong Yang Enyan |
| Organization | CCER, PKU; Center for Chinese Agricultural Policy, CAS |
| Email | grongma@163.com; enyan.yang@ gmail.com |
| Key Words | Social Networks; Folk Credit; Self-Employment; Informal Finance; Rural China |
| Abstract | As one type of social capital, social networks play a great role in promoting employment and raising income. This paper uses data from rural China, and finds social network can significantly raise the probability and income from self-employment, but have little effect on the income from farming and wage earning. The more social networks one has, the more money he can borrow from his relatives and friends, and the more likely he will start an enterprise. The growth of the enterprises is also relying on folk credit. Therefore, folk credit is the channel that social networks can promote self-employment. We also find that, the effect that social networks has on self-employment is larger in places where formal finance is less developed. We argue that informal finance which relies on social networks can make up the failure of formal finance in rural China. |
| Serial Number | WP15 |
| Time | 2010-11-26 |
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