| Party membership and social network, as two forms of non-market power, have significant effects on personal income. Do the effects vary across different ownership sectors? Existing literature has verified the political identity and social capital can bring income premium. However, the relationship between their effects and marketization has been under-explored. Taking the opportunity of China's market-oriented reform, this paper employs the different degrees of marketization in various types of ownership units and different years as two dimensions to measure marketization, and probes into whether the effects of non-market factors vary across different ownership units as well as whether the rewards of Party membership differ between two years. By studying China Household Income Project Survey (CHIPS 2002 & 1995) data, it is found that Party membership can significantly increase personal income, but this effect doesn't differ by ownership unit or between the year 1995 and 2002. Meanwhile, the benefit of social network on earned income depends on the nature of ownership sectors. Social network doesn't assist State-owned units, where the level of marketization is relatively low, but it brings substantial income premium in market-oriented parts of the labor market. The significance of this research lies in, if the marketization proceeds over time and non SOE sectors are more subject to market forces than their SOE counterparts, then our paper provides empirical evidence that marketization doesn't necessarily weaken the influences of non-market forces, instead, the rewards for non-market power could possibly be materialized in monetary terms thanks to the newly born market mechanism which is filled with non-market factors.Section 2 reviews relevant literature, and taking social capital as the core concept, it sorts out its relationship between the associated terms such as informal institution, formal institution, discusses the impact of social capital on the human behavior and economic development across the world, interprets the interaction between social capital and formal institution, and summarizes existing research which studies how social capital and its effects change with marketization using the data from China. At last, it brings the question that how the non-market power affects individual earnings in modern China's urban area, and the answer further enriches the empirical evidence that how social capital and other non-market factors interact with marketization. These findings can help us comprehend what Party membership and social capital really represent, and more importantly, the nature of China's market economy and the future pathway to its economic transition as well.Section 3 describes the data and the statistical analysis demonstrates clearly the income promotion driven by Party membership and social network. Section 4 is the key part of this paper. For the purpose of comparison, it initially partitions the entire sample into different segments, and points out the potential problem and suggests a solution. Then by constructing the interaction terms of non-market power and ownership units, it investigates the benefits of Party ownership and social capital in different ownership sectors. Meanwhile, based on the pooled cross-sectional data of 1995 and 2002, it discusses whether the income premiums brought by Party membership changes with time, and the result shows that Party membership doesn't pay more as marketization proceeds. At the same time, it implies Party membership doesn't entirely represent unobserved ability, otherwise it should be more valuable in more market-driven cases.Section 5 concludes and states its implication for the economic and social development in modern China. |
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