Decomposing the effect of height on income in China: The role of market and political channels

•Effect of height on hourly wage is decomposed into market and political channels.•Taller people are more likely to become members of the Communist Party.•Communist Party membership results in an increase in hourly wage.•Via this political channel, a 1 cm increase in height generates 0.06% higher hourly wage for male.•Via the market channel, a 1 cm increase in height generates 1.18% higher hourly wage for male.

It is well known that height is positively associated with earnings. Based on individual level data, this paper investigates the channels through which height influences income in China. Our first key finding is that for males (females) a 1 centimeter (cm) increase in height leads to a 0.5% (0.02%) increase in the probability that he (she) becomes a Communist Party member. Further, the hourly wage of Communist Party members is approximately 11% higher than non-members for males, while no difference in the hourly wage between Party members and non-members is observed for females. Therefore, a 1 cm increase in height leads to approximately a 0.06% increase in the hourly wage, which is observed only for males. We label this the height premium in earnings through the political channel. Second, controlling for the political channel of the height premium, a 1 cm increase in height leads to a 1.18% (1.04%) increase in the hourly wage for males (females). We label this the height premium through the market channel. Together, these results suggest that the height premium in earnings through the market channel is much larger than that through the political channel.