Intergenerational Income Mobility in China and its Implications for Education Finance Policy

Intergenerational income mobility is of great societal importance due to its relevance to equal socio-economic opportunity and future economic efficiency.;In Chapter 3, I utilize a recent comprehensive household survey (which offers detailed information on individuals' demographic and economic situations), together with a longitudinal nation-wide survey, to measure the extent to which economic status is transmitted from one generation to another in China. I find statistically significant evidence that income is correlated across generations for individuals born in the 1970s and 1980s, and that, for certain groups, intergenerational income mobility tends to decrease over time.;In Chapter 4, I examine the mechanisms of intergenerational income persistence, mainly focusing on the role of education in promoting or reducing intergenerational income mobility. A counterfactual-decomposition method is employed in this part to estimate the proportion of intergenerational income elasticity (IGE) that can be explained by one's education attainment with different measures. In addition, the overall education contribution is further decomposed into a supply-side effect describing the relationship between family income and education attainment, and a demand-side effect describing the relationship between education attainment and labor market returns. My results suggest that education attainment plays a very important role in intergenerational income persistence for individuals born in the 1970s, but explains no more than 20% of the intergenerational income relationship for those born in the 1980s. While the demand-side effect dominates the contribution of education for the post-70s generation, the supply-side effect (the economic constraints found in education attainment) dominates the contribution of education for the post-80s generation.;In Chapter 5, I discuss the role of education financial indicators in reducing economic constraints on higher education attainment, and thus indirectly promoting intergenerational income mobility in China. The evidence regarding economic constrains shows a strong relationship between family income and education attainment at both the high school and higher education stages, which implies that economic constraints on higher education enrollment emerge earlier on the post-compulsory education pathway -- specifically, when students transition from junior high school to high school. The results for the impact of education financial indicators show that the net cost of higher education plays an important role in reducing economic constraints on higher education enrollment, and that the structure of governmental investment at different stages of education influences economic constraints on high school enrollment.;This dissertation investigates the extent to which intergenerational income persists in China, the mechanisms behind intergenerational inequality, and premises for policy intervention. This dissertation consists of three separate empirical studies. The first one examines the relationship between parents' income and the long-term welfare of their children for birth cohorts (The post-70s and the post-80s generation) in China. The second empirical study explores the role education attainment plays in the intergenerational income relationship. The third one seeks possible policy intervention channels to facilitate intergenerational income mobility.;This dissertation contributes to the extant international discussion by providing evidence on intergenerational income mobility and its longitudinal trend in the Chinese context. The interaction between families, labor markets, and public policies that structure a child's opportunities and determine the extent to which income is related to family background are discussed in detail. This dissertation also provides guidance for policymakers attempting to develop more appropriate public policies to promote intergenerational income mobility in China.