Empirical Studies Of Intergenerational Income Mobility: Economic Mechanisms And Public Policy

Intergenerational Income Mobility is the extent to which children's income depends on their father's.A moderate intergenerational income mobility is important in both promoting the social equality and economic development. On the one hand, it is a measure of equality as it reflects the dynamic income distribution and the opportunity inequality. On the other hand, with the growing importance of tertiary industry and environmental protection, human capital is becoming more and more crucial to the economic development in the future. Higher intergenerational income mobility can promote the quality and quantity of a nation's human capital by helping poor children to achieve their full potential, improving the matching efficiency of labor market, and providing the incentive for hardworking and human capital investment.Meanwhile, with the growing income gap and social stability problem being more and more important, structural transition and change of the mode of economic growth is now becoming a pressing task of the Chinese economy. Higher intergenerational income mobility can not only benefit the economic growth but also alleviate the social pressure caused by the income inequality. The family planning policy and the extraordinary importance of children's welfare in Chinese traditional culture make the intergenerational mobility more significant in China.However, there are signs that the intergenerational mobility is showing a deteriorating turn recently. Both the public and governmental press have joint in the hot discussion of intergenerational social and economic inheritance. This dissertation is thus aimed at studying the intergenerational income mobility in China and providing possible policy recommendations. Compared with existing literature, this paper focuses on the following work which is still not perfectly solved in the current discussion:Firstly, this paper does a thorough literature review on intergenerational income mobility from the perspective of measurement, mechanism, influence and policies. The handbook of labor economics has done two well-organized review in 1999 and 2011, though all of them neglect the influences and policies. This paper is thus shown as a more comprehensive review and the first of its kind in Chinese.Secondly, this paper concisely calculates the trend and extent of the intergenerational income mobility in China, which can contribute to the current debate on this issue. Using the labor income as the main statistic, and based on a careful selection of the effective sample, this paper finds a rising mobility from 1988 to 1995 and a decreasing trend afterwards. The intergenerational income mobility will amount to above 0.6 after taking into consideration the measurement bias caused by using the single year income instead of permanent income, which is relatively high in comparison with other countries.Thirdly, this paper decomposed the intergenerational income mobility in China by using empirical and statistical method.The results suggest that human capital, social capital and wealth have a total contribution of more than 60% to the intergenerational income transmission in China, with housing assets and financial assets being the most important factors. The sibling effect is roughly 0.87, while the income correlation coefficient of adoptees is about half of that of biological children. Generally, the results suggest both genic and environmental factors are important in China.Finally, this paper analyzes the relationship between intergenerational mobility, economic growth, and income inequality. The international cross section data and pooled Chinese provincial data all suggest high mobility is accompanied with high GDP and low GINI coefficient. This paper thus suggest building a well-rounded policy system to improve the intergeneration mobility in China, including a sound public education system and good family education atmosphere, well-provided basic public goods, as well as promoting education equality, eliminating the labor market segment and deepening the market-oriented reform.In all, this paper builds a well-rounded economic research framework for intergenerational income mobility, and carries out empirical analysis using Chinese micro data. However, the exact causal mechanism of intergenerational mobility and the corresponding public policy still remains as a puzzle which is quite challenging and important for future research.