Centre for Development Economics
and
Department of Economics, Delhi School of Economics

ANNOUNCE A SEMINAR

Social Identity and Inequality:
The Impact of China’s Hukou System

by

Farzana Afridi
Delhi School of Economics

On Thursday, November 11, 2010 at 3:00 p.m.

Venue : New Seminar Room [First Floor]
Department of Economics, Delhi School of Economics

All are cordially invited

Abstract

We conduct an experimental study to investigate the causal impact of social identity on individuals’ response to economic incentives with a focus on the decades old system of classification of households or the hukou institution in China, which favors urban residents and discriminates against rural residents. Our results indicate that making individuals’ hukou status salient and public significantly reduces the performance of rural migrant children on an assigned task by 10 percent. As a result, the distribution of earnings of rural migrants shifts to the left – the percentage of rural migrants in the bottom earnings percentile increases significantly by almost 19 percentage points. However, among non-migrants the proportion with earnings in the bottom 25th percentile drops by 5 percentage points and increases by almost 8 percentage points in the top 25th percentile, albeit insignificantly. The results demonstrate the impact of institutionally imposed social identity on individuals’ intrinsic response to incentives, and consequently on widening income inequality.