Beauty Premium: Is Discrimination the Main Reason? Empirical Research Based on the China Labor-force Dynamics Survey

Gu Tianzhu

doi:doi:10.16538/j.cnki.jfe.2018.02.007

Summary

Previous studies have shown that a beautiful appearance is correlated with wages, which is known as the " beauty premium”. There are two main reasons for the existence of beauty premium. The first explanation is that appearance reflects differences in individual health and cognitive capabilities, as well as affecting communicative confidence, opportunities, and capabilities, thereby leading to differences in working capacities and wages. The second explanation is that differences in working capacities cannot fully explain the beauty premium and there exists appearance discrimination in the labor market. There are many questions worthy of being answered. Is there beauty premium in the Chinese labor market? If yes, what are the causes of the beauty premium? Is it mainly due to differences in working capacities or due to employer discrimination based on appearance? Some studies have confirmed the existence of beauty premium and appearance discrimination in the Chinese labor market. However, beauty economics has not been sufficiently discussed. The previous studies only try to find evidence for the existence of appearance discrimination and mainly focus on whether appearance itself affects wages ‘significantly’ in statistical sense. Furthermore, a very important factor, social ability, is omitted in previous empirical studies of appearance discrimination. As social ability（or opportunity）is affected by appearance on the one hand, and it is a kind of working capacities and plays an important role in productivity and wages on the other hand, the omission may have led to overestimation of appearance discrimination in labor market. The main contributions of this paper are as follows. Firstly we use social network as an indicator of social ability（or opportunity）to improve the estimation of appearance discrimination in labor market. Secondly we further decompose the sources of beauty premium into discrimination part and capacity difference part, and explore the significance of discrimination in beauty premium. Finally, we explore the role of appearance in social network, and discuss the potential appearance discrimination in social interaction rather than the discrimination in labor market. In this paper, by using the data from the China Labor-force Dynamics Survey, we explore the role of discrimination in beauty premium. We mainly focus on the appearance indicator of height, and take statue（BMI）and facial attractiveness as control variables as their coefficients might be biased because of the reverse causality problem. The results of OLS regression show that the direct effects（labor market discrimination）of appearance on wages are very limited after controlling social network, human capital, and other working capacity variables. After decomposing wage differentials, we find that higher wages for males with higher height are almost entirely attributable to differences in social capital, human capital, and other individual characteristics. 60% of lower wages for males with shorter height could be explained by differences in endowment characteristics and only 40% are unexplained（due to discrimination）. For females, the wage differentials in height are also attributable mainly to the differences in endowment characteristics. The unexplained part of discrimination has opposite directions for shorter females. That means, the labor market does not discriminate but instead favors shorter females. Our results confirm the existence of beauty premium in the Chinese labor market, but beauty premium is not mainly due to the discrimination of consumers or employers, and instead is attributable mainly to differences in social ability, human capital, and other individual characteristics. However, the positive relationship between appearance and social network may imply the significance of appearance discrimination in social interaction other than in labor market.