The Mechanism And Empirical Study Of The Effect Of Directed Technical Progress On Income Mobility

In frontier research on income mobility and income distribution, researcher attribute income mobility and inequality to occupation, education and regime but technical change. The long-term income mobility should be rooted in technological progress and human capital factor. The literatures of income distribution only use biased technology theory to explain the skill premium phenomenon.Based on this, the article build a overlapping-generations model contains heterogeneous families in the perspectives of directed technical change, makes a research on the directed technical change and laborer ability in physical capital and human capital accumulation, further analyzing how directed technical change effect income mobility. Using the time-series data in China, we analyze the income position transformation of households when direction of technology and the ability of households changed in numerical method. Numerical simulation results show that income position of households in steady-state is decided by directed technical change and abilities. The higher the capital-augmenting technological improvements, the faster household income convergent, and capital-augmenting technological improvements improved the learning ability’s contribution to income, but the growth rate of income depends on the relative levels of learning ability and social skills. capital-augmenting technological improvements decline will make some social-skill-dominant family income jump into the higher position, it also make learning-ability-dominant family income position fall. the direction and the number of families making income flow depends on the level of capital-augmenting technology.Secondly, this article calculate the national, provincial, urban and rural income mobility in China, by using various index of income mobility we analysis the differences of income mobility between regions or urban and rural. The index of income mobility include the absolute index, its growth effect, dispersion effect, exchange effect, the relative index(Hart index and Sharrock’s index) and the direction of income flow. National relative income mobility index show inverted-u-shaped trend during the sample period, China’s household income inter-temporal correlation is rising and the power of income flow is weaker, income structure is curing. Absolute mobility index rising with fluctuations during the sample period, its three effect are exchange growth and dispersion from highest to lowest proportion of the index. The absolute mobility and its three effects are all higher in China than Belgium, Germany and the United States. The proportion of exchange effect are higher in foreign countries. Household income in Jiangsu is curing seriously, the flexibility of income in Shandong and Guangxi is higher. All provinces income mobility in recent years has reduced, income structure has been solidi. Urban income mobility is weaker than rural, both rural and urban income show powerless of getting upgrade and curing in the position by not getting downward.Thirdly, by using normalized supply-side system approach, nonlinear similar unrelated and maximum likelihood estimate, we estimate the national and provincial product function and technological progress related parameters. After getting the elasticity of factors, we calculate the index of directed technical change during 1978-2012. Capital and labor in the national and provincial level are complementary according to the results. Capital-augmenting technology is declined and labor-augmenting technology is growing. The results from nonlinear similar unrelated method and maximum likelihood method are quite similar and robust. The index of directed technical change shows that technological progress towards capital in most of the time,but the strength seems weaken since 1994. Jiangsu technological progress keep changing between bias capital or labor, and the bias strength weakening gradually. Shandong’s, Henan’s and Guangxi’s directed technical progress show difference before and after 1997. Before 1997 three VII provinces’ directed technical progress shifting between capital and labor, and three provinces biased capital the strength decreases after 1997. Directed technical progress of Hunan and Guizhou is a cone-shaped characteristics in the sample time, in 1990-1995 the index’s absolute value is significantly higher than the rest of the year. The trend of the index in Hubei is similar to the country.The fourth, we analysis the correlation between income mobility and directed technical progress. The Granger test confirmed that directed technical progress is the Granger cause of income mobility, impulse response function shows that the instantaneous impact of directed technical progress will cause the initial fluctuations in income mobility. Variance decomposition results show that income mobility can be explained by directed technical progress and its contribution stabilize after the forth year.Then, based on the theory model and the calculation of income mobility and directed technical progress, we build econometric model to analyze how directed technical progress influence income mobility. In the model we use various kinds of index of income mobility in the panel regression, after that, by using marketization as threshold variable, we regression the same model with threshold regression to observe the differences between two results. Panel regression results confirmed that directed technical change can improve income mobility, both the absolute and relative index. Directed technical change improve the growth effect and decline the exchange effect, and there is no relation between the dispersion effect and directed technical change. Threshold regression results show that marketization have significant on the effect of directed technical progress change income mobility. The role of technological progress bias in income mobility strength with the increasing marketization level, the growth effect show U-type and the influence on both dispersion effect and exchange effect only exists in high level of marketization. When marketization level is low, the directed technical progress towards weaken the correlation of two phase of income, and make the seating arrangement of incomes change quickly. When the marketization level is higher, the accumulation of physical and human capital making technological progress bias could not significantly affect the correlation of two incomes, but their effects on individual income flow increased.Finally, Multinomial Logit Model results shows that directed technical progress biased capital can increase the probability of rising household income position, but the opposite effect are not robust. Age, health insurance and education tend to promote the income flows, it means those will both increasing the probability of income flows up and down. Family size and subsidies tend to be stable family income. Business income the possibility of income upward, disease spending increased risks of family income downgrade. Urban and rural regression results show that directed technical progress tend to improve the urban household income upgrade, and increased the probability of rural income downgrade. Business income can promote income upward both in urban and rural, it is less risky in urban than in rural, its downward effect of income flowing only significant in rural. Diseases expenditure on rural family income downward pressure is getting worse.