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The Economic Benefits Of Being A Member Of The Chinese Communist Party

Membership of the Chinese Communist Party seems to have clear economic benefits for individuals. But according to research by Hongbin Li, Pak Wai Liu, Junsen Zhang and Ning Ma, party members fare well not because of their special political status per se, but because of the superior ability that made them party members in the first place.

Their study, published in the October 2007 issue of the Economic Journal, suggests that the fact that party members are China''s elite in terms of their abilities as well as their affiliation may be a key reason for the success of the party and of China''s reforms.

There is a growing interest among economists in measuring the value of political status and connections. In the context of China, social scientists have attempted to measure the returns to being a member of the Chinese Communist Party.

Many find that party members have higher earnings than non-party members, and thus claim that party membership has a positive value in terms of income in China. But these estimates are subject to bias, because party members may have higher earnings due to greater ability or a more advantageous family background.

This study empirically measures the value of Chinese Communist Party membership for an individual''s earnings. The main innovation is to control for the effects of unobserved ability and family background by using unique data on twins collected in urban China.

As twins are genetically similar and have the same family background, they should have similar ability or family background. Thus, by contrasting the earnings of twins with and without party membership, it is possible to be more confident that any correlation observed between party membership and earnings is not due to a correlation between party membership and an individual''s ability or family background.

The results using the sample of twins are in stark contrast to results using non-twin samples. Comparing the earnings of a party member with a non-party member randomly selected from the population, party members earn 10% more than non-party members. But comparing the earnings of a pair of twins, one of whom is a party
member and the other is not, the earnings premium becomes zero.

This suggests that the party premium observed by previous studies is due to the high ability and advantageous family background of party members. Party members fare well not because of their special political status per se, but because of the superior ability that made them party members in the first place. The hypothesis that party
members are of higher ability than the average Chinese could be well grounded, given the party's strict and merit-based mechanism for selecting members.

The survival of communism in China depends on the party, and the survival of the party depends on the quality of its members. The high quality of party members could explain why they have been able to come up with and implement market-based reforms effectively, and why they are able to adapt constantly to the new environment but keep the communist ideology alive.

In this sense, the fact that its members are China''s elite may be an important reason for the success of the party and of China''s reforms. These elites have recently met in Beijing for the Seventeenth National Congress of the Communist Party of China to set another milestone for the country's reforms.

''Economic Returns to Communist Party Membership: Evidence from Urban Chinese Twins by Hongbin Li, Pak Wai Liu, Junsen Zhang and Ning Ma is published in the October 2007 issue of the Economic Journal.