Political Capital and Household Income: Evidence from Twenty-Four Transition Countries
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ORIGINAL PAPER
Political Capital and Household Income: Evidence from Twenty‑Four Transition Countries Tingqiu Cao1 · Xianhang Qian2
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Using data from 24 transition countries, we investigated the impact of political capital on household income and further examined the role of market transition. We found that households with Communist Party members had higher income, but market transition could mitigate the effect, and it persisted after addressing endogeneity concerns. Household members’ work in state sectors, social networks, and trust level of households’ heads were impacting mechanisms. Heterogeneity analyses demonstrated that each member’s political capital could heighten household income and market transition could weaken the effect. Market transitions reduced the advantage of political capital in both urban and rural areas, though the effect was larger in rural areas. Keywords Political capital · Market transition · Household income · Transition countries
Introduction The important role of political capital i.e., Communist Party membership on household income has been widely recognized in transition countries, such as Russia (RonaTas and Guseva 2001), Vietnam Markussen (2015) and China (Appleton et al. 2009; Liu 2003; Zhang et al. 2012). Although some studies have emphasized the necessity of economic benefits of political capital in transition countries (Lin 1992), it may lead to income equality among households (Szelenyi and Kostello 1996). One topic of interest is how this changes in the process of market transition. Nee (1989) proposed the market transition theory which argued that individuals with political capital can get higher return in transition countries, but the return will be in decline during the process of market transition.1 Using data on China, Nee (1989, 1991) provided empirical evidences for the theory. The theory has been examined by numerous other Chinese
studies, covering Central and Eastern European Countries. However, both theoretical and empirical inconsistencies are prevalent (Bian and Logan 1996; Parish and Michelson 1996; Rona-Tas 1994; Xie and Hannum 1996; Zhou 2000). Accordingly, Nee and Cao (2002) argued that more empirical studies on the theory should be conducted. There are two main limitations to current studies. First, the research focuses only on samples from individual countries, such as Hungary, Poland, and especially China, which cannot explore the impact of the process of market transition. According to the World Bank’s definition, the transition process of transition countries did not end until transition countries joined the European Union in 2004, 2007, and 2013. Therefore, the results of these studies are limited in terms of providing a transition scenario. A direct method to identify the theory would be to compare the impact of political capital on household income between transition countries (TCs) and countries in which the transition process is over (TCOs). 1
* Xianhang Qian xianha
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