Empirical Study On China's Education Inequality And Income Inequality

During the economic development process, how to balance efficiency and equality is not only a hot topic in economics research but also a key to social harmony. Since the reform and opening-up in 1978, China's economic development made a great progress and people's income level had a fast increase; meanwhile the income inequality was also raised. Among many factors affecting income inequality, education is usually recognized as an important chanell, whether educational attainment is equal distributed has respect to the extent of income inequality. And education distribution also has relation to human capital accumulation, so that affect the economic development further. As a result, education plays an important role of balancing efficiency and equality. That is why there is a widespread concern about education inequality. Research about education inequality and income inequality have the important meaning to theories and actual.With the basis of summarizing literatures on education inequality and income inequality, this paper further describes tracks of instutional changes since the reform and opening-up in 1978, and constructs a theoretical framework between education inequality and income inequality, then draws an empirical research on their interrelation and mechanism. Moreover, the reduction of poverty plays an important role in controlling income inequality; and poverty people always belong to disadvantaged group which lack of education, so poverty reduction also helps to lower down education inequality. In fact, researching the relationship and mechanism from education inequality to poverty not only expand the research scope between education inequality and income inequality, but also support more empirical cases in poverty related. In addition, from the point of equal opportunity this paper takes a furthet discussion about education inequality and income inequality, which includes measurement and decomposition of income mobility, and analyzes the relationship between education and income mobility. Income mobility reflects the variance of relative income rank, so sufficient income mobility is helpful to decrease income inequality with the background of higher income gaps. At the same time, education, as a key chanell of promoting income mobility, takes a great place in equal opportunity of income distribution. Short in all, all these researches in this paper can help us to understand how to ensure equality during economic development. Furthermore, such results empirically examine related theories in economics for development.The creative points of this paper are as follow:(1) Based on review the instutional change of China's education inequality, income inequality and poverty reduction, this paper constructs a theoretical framework between education and income inequality. Theoretical model is established at a classical model from Galor and Zeria (1993), but with improvement in two aspects. The one is expanding individual's educational choices to no education attained, basic education and high education, because the return to education has heterogeneity. Another one is introducing laobor market and government behavior factor in model to study their effect on education inequality and income distribution, so that the machnism between education inequality and income inequality can be clearly described. Theorerical analysis not only gives a clearly describe on the endogenous interration between education inequality and income inequality, but also lays a foundation for latter empirical study. Further, this paper draws an empirical study on the relation between education inequality and income inequality. This paper adopts education gini coefficient to measure education inequality of all regions in mainland China, and it still belongs to the first time in existed literatures. Cosidering the endogenous relation between education inequality and income inequality, this paper constructs a simulataneous equations system including education inequality and income inequality, and adoptes China's provincial panel data from 1996 to 2004 and 3SLS method to estimate. Results reveal that income inequality leads to education inequality while the reduction of education equality doesn't contribute to the decrease of income inequality, where there is no simple casual effect between education inequality and income distribution. The reason why education equality and income equality doesn't matually promote each other may lie in the heterogeneity in education returen, effects from labor market reform and urban-rural division.(2) Poverty groups, as a unique feature in income distribution, always stay at the bottom of income levels. So wether poverty can be eminlinated is closely related to the reduction of income inequality and education inequality. And existed education inequality confines the poverty to invest human capital so that disadvantaged people lose the ability in escaping from poverty. If the education inequality couldn't be decreased effectively in the long term, it may leads to a transition from temporary poverty to lasting poverty, and finally deepending to lasting poverty. At this time, what is so called vicious circle of poverty will happen, as the same as Mathew effect. In fact, this paper uses data in time series from 1983 to 2006 and Johansen co-intergration methods to study the long-run equilibrium relationship between education inequality and poverty. Further, in order to clarity its mechanism, we also draws an empirical study by micro survey data and Logit model. Results shows that getting basic education is key to shake off poverty, and the reducation of education inequality helps the poor to form basic human capital so that poverty can be eliminated.(3) The feature of income mobility lies in equal opportunity. Compare to inequality of existed wealth distribution, unequal opportunity deserves more attention and has more influence on society. In a society of big income distribution gap, suffieicnt helps to reduce income inequality and its related negative effect. As a result, from the point of the variance of relative income rank, income share and social welfare, this paper measures the income mobility from 1989 to 2006. With the basis, this paper firstly decomposates income mobility from the point of relative income position, which helps to understand the internal cause of chaning income mobility. In addition, this paper establishes a Mlogit model to study at what extent education can affect income mobility. The results shows that income mobility in urban and rural goes down after a period of rising,the turing point lies in the latter 1990s; meanwhile, income mobility doesn't improve social welfare. Decomposition results reveal that variations of individual's income level are mainly centralized in low income groups, which means existed income distribution is hard to change, that doesn't help to lower down income inequality. At last, education plays an important role in promoting reasonable income mobility, such as higher education development in urban areas and supply in basic education in rural areas.