The economic gains of cadre status in rural China: Investigating effects and mechanisms

•Income of rural cadre households was 10% higher than that for non-cadre households.•Economic gains from cadre status mainly came from non-agricultural sources.•Cadre economic gains depend on regional economy and income inequality.•Newly elected cadre households acquired economic gains immediately.•Cadre households lost economic gains immediately upon losing their cadre status.

Using nationally representative rural household panel data from 2003 through 2007 in China, we examine economic gains of cadre status and channels through which cadre status increases household earnings. We find that income of cadre households was approximately 10 percent higher than that of non-cadre households on a per capita basis. The cadre income premium did not come from agricultural income but mainly from non-agricultural sources, especially the income from the village and the government. We also find that cadre income premiums were much larger and more significant in economically advanced regions than in less developed regions and in villages that exhibited higher income inequality than their counterparts. Furthermore, this study shows that newly elected cadre households acquired the economic gains immediately and cadre households lost the economic gains immediately when they lost their cadre status, which implies that the cadre economic gains were less likely attributable to human capital of cadres but mainly due to cadre status. Our findings provide evidence for the ongoing debate on distribution of economic gains during the process of transition in emerging market economies.