Conditional returns to political capital: Party membership and China's SOE reform

This study uses China Household Income Project (CHIP) data (1988-2018) to examine whether the wage return to Communist Party (CCP) membership changed with China's 1998 state-owned enterprise (SOE) reform. We instrument Party membership with birth-cohort exposure to the Sihua policy, which changed the probability for individual Party entry, and with paternal Party membership. For the compliers these instruments identify, IV estimates indicate a large planned-economy premium, on the order of 39 percent, though the confidence interval is wide. The premium shows no decline on average after the 1998 reform. It is markedly lower, however, in provinces that restructured most deeply, by roughly 33 percentage points relative to shallow-reform provinces. Estimates are robust to alternative instrument definitions and instrument sets. Together the results suggest that returns to political capital are conditional rather than uniform: political capital keeps its value where socialist institutions stayed intact and loses it where they were dismantled, a pattern that reconciles market-transition and power-persistence accounts rather than validating either alone.