Empirics of Identification Challenges and Strategies: A Literature Review on Social Capital’s Labour Market Role
The principal proposition of social capital theory, in the context of labour markets, has been that the embedded resources have significant influences on individual labour market outcomes. However, since most of the empirical social capital studies in sociology are based on non-experimental data, they are naturally exposed to endogeneity problem rising from a constellation of sources such as omitted variable, self-selection, sample-selection and simultaneity problem. For sociological analysis on the labour market effects of social capital, if the research interest lies in identifying the mechanism or causality, rather than merely describing the statistical association, these potential estimation biases should be taken very seriously. This is because, unless the endogeneity problem is explicitly pointed out and well corrected for, we cannot arrive at any convincing causal conclusions about whether social capital matter or not at all. In the existing sociological literature, however, limited emphasis has been placed on these problems. This study therefore provides an extensive review of the previous studies in estimating the labour market effects of social capital, focusing on the potential estimation problems and the identification strategies to correct for the endogeneity bias.


Network Effects among Rural-to-Urban Migrants in China
Using data from 22 provinces in China, this study analyzes the effect of origin-based migrant networks on wages among rural-to-urban migrants. Heckman’s two-stage method is used to correct for sample-selection. Natural disaster in the village of origin is used as an instrumental variable to deal with potential endogeneity bias. The results presented here verify significant network effects on wages of migrants.


Selecting Heterophilous Resources: Estimating the Effect of Social Capital with the Presence of Self-selection
This study examines the effect of social capital on individual outcomes with the presence of non-random friendship. Data from the 2003 Chinese General Social Survey are analysed to uncover how the average years of schooling of one’s friends influences one’s employment and income. To correct for the selection bias in estimation, the average social capital over a set of observationally identical individuals is used as an instrument variable. The empirical results not only verify the significant role of educational this form of social capital, but also suggest the presence of social heterophily in relationship formation by indicating that the estimates are biased downward if one does not take into account self-selection.


The Effects of Using Contacts under State Socialism: A Replication and Extension
Using data from former East Germany and contemporary China, this paper analyzes the direct effects of using contacts to find jobs on individual labour market outcomes. The first-difference model is fitted onto data to rule out the time-fixed individual unobservables on which self-selection problem may arise. The significant differences between the within-subject estimates and the estimates from standard OLS models suggest the presence of selection of job-seeking methods. Although consistent with previous findings in market economies that little evidence supports the direct role of using contacts, results here reveals different selection mechanisms between China and Germany.