Social-capital mobilization and income returns to entrepreneurship: the case of return migration in rural China

Abstract

Temporary labor migration in developing countries is an important urban - rural linkage that has a potential impact on rural development. According to the new economies of labor migration, it is often a strategy used by families with small farms to acquire investment capital for future business formation. In this paper, I argue further that human-capital accretion during migration reinforces the mobilization of local social capital, which in turn enhances a returnee's entrepreneurship. By using the results of an in-depth survey of returned labor migrants in rural China, I seek to explain the mobilization of social capital and income return to entrepreneurship in a multivariate framework. I find that skilled returnees are indeed more prone to mobilize social capital. The income return to local social capital is as considerable as that to investment capital and skills acquired at the urban destination. The findings suggest that the consequences of labor migration can be better understood through the integration of the new economics of labor migration and social capital theories.