Intergenerational Income Mobility In China Based On Family Heterogeneity

After the reform and opening, Chinese market transform from plan type to market type. With the deepening of economic reform, China’s economic has developed rapidly, and people’s lives have improved greatly. Yet at the same time, Chinese residents’ income gap is widening. Through the widening income gap, many scholars began to focus on income mobility from the point of social fairness. The main problem of Chinese income distribution is not only on the surface of such large income gap, but rather the unequal opportunity affecting the income gap.Intergenerational income mobility is a direct indicator to measure whether the income distribution is fair. Intergenerational income mobility means the relative position of economic status between two generations in the same family, that is to say how much will a person’s income affected by his/her father, and precisely it is the income elasticity between offspring and parent.Most of the studies on intergenerational income mobility are about the proxy variable of the permanent income and the national or regional differences in intergenerational income mobility and something else, which ignore the heterogeneity across families. Family heterogeneity refers to the unobservable factors across families that affect intergenerational income mobility.The crucial question of this paper is:whether the home heterogeneity will impact on the intergenerational income elasticity in China. To solve this question, we established two econometric models, to determine the home heterogeneity indeed impact on intergenerational income elasticity of China by comparing results from two models. Basing on these, the study examines the factors influencing the intergenerational income mobility, finds methods to increase the intergenerational income, and accordingly puts forward relevant policy. The paper includes five chapters as follows:The first chapter is the introduction. It describes the background of this research and the concept, elaborated the significance. At the last of this chapter, it describes the structure of the paper and the innovations.The second chapter is literature review. This chapter briefly reviews the theoretical and empirical researches. The research on intergenerational income mobility in China is on the first step, while the foreign scholars have studied it more than30years. The accumulated experience must benefits the Chinese researches. Then it discusses the consistency, depth and width of literatures. At last it introduces the concept of family heterogeneity.The third chapter is study-designing. This chapter is divided into two parts:the first part is the empirical model, and the second part is the description of data and sample. The first part of the empirical model is based on the literature. The second part is the description of data and sample, introducing the data sources and the sample selection methods, showing the sample descriptive statistics.The fourth chapter is empirical testing and analysis of results. This chapter shows the estimation of intergenerational income elasticity and analyzes the impact of factors. Firstly, it shows the results of least squares model, control function model and smoothing coefficient model, getting the estimated intergenerational income mobility elasticity, comparing with other countries, combined with the transfer matrix and elasticity coefficient graph. After that, it uses the stepwise regression to add the parent and offspring education and vocational variables into the model to verify the impact of human capital investment and social network on the intergenerational income mobility. The fifth chapter is the conclusion. This chapter summarizes the paper and forms the suggestions on policy. Finally it points out the limitations of this study and prospects.Empirical evidence indicates that intergenerational income elasticity obtained by varying coefficient models is higher than the ordinary least squares model, showing that the heterogeneity of family does have impact on intergenerational income mobility. In addition, the poor people have the lowest intergenerational income mobility. The families of farmers, fishermen and hunters and those with low level of education have the weakest intergenerational income mobility, while the highly educated families have strong intergenerational income mobility. The stepwise regression finds that investment on human capital and social networks have an important impact on intergenerational income mobility. Among them, the social network has greater impact.Income mobility research has become mature, but intergenerational income mobility research has just started. The main innovation of this paper lies in that considering home heterogeneity when estimating intergenerational income elasticity coefficient. At the same time, according to the smoothing coefficient model, we got the relation between fathers’characteristics and intergenerational income elasticity; this can observe the intergenerational income mobility between different families more intuitively. Due to my research capacity, study method and constraints of data, there are still something to be further studied such as the selection of data, sample representativeness and the point of analysis, etc.