The move to a more market-oriented economy is associated with evidence of
increased inequality in the incomes earned by men and women. The context of our
study of this question is the recent large-scale reform of the inefficient state sector,
which has caused layoffs of urban workers that dramatically changed the state of
employment in urban China. One factor in determining success in an imperfect labour
market could be related to guanxi, the Chinese variant of social capital.
We develop a model of social capital in which the decision to invest in guanxi is a
function of time and resources expended, which may reflect and cause gender
differences. Our original measures of social capital are created with a data set
administered in urban China in early 2000. We find that there are gender differences
in the stock of social capital and returns within the labour market. Women have less
social capital than men and also lower economic returns in terms of earned income.