Intergenerational Income Mobility In China

With the sustained and rapid development since 1978, China has been witnessing a continuous improvement of people’s living standard and international prestige. Meanwhile, however, as the Gini Coefficient has been above 0.4 since 1990s, the income gap in our country keeps expanding and has become one of the widest among another countries. It is noted that the Gini Coefficient is a static index which focuses on the income inequality among different families and individuals, while fails to explains the inequality among different generations. This paper studied the intergenerational mobility and transmission mechanism of income in China and provided suggestions to improve the mobility.This paper estimated the interval of intergenerational income elasticity (IIE), using the CHNS database in 2000-2011, by means of IV estimation and OLS estimation which are based on the dual logarithm model introduced by Solon in 1992. The comparison of HE between urban and suburb, among different regions, income groups and countries were conducted also. It was found to be [0.583,0.674] of the interval of HE in China, which is higher than developed countries including the United States and the United Kingdom as well as high welfare countries in Northern Europe and Southern Hemisphere; While mobility in urban and rural appears the same gradually, it is rising from the east to the west; Besides, children from lower income groups are more likely to transfer to higher income groups. Based on the study above, this paper explored the roles of which education, job and BMI play on the intergenerational transmission of income through optimizing the structural equation model established by Han (2011) and found out that education and job are able to promote transmissions among social classes.Based on the conclusions above, it is suggested that the government accelerate the process of urbanization, narrow the gap between urban and rural areas and deepen the market reform. Also, it should be a necessity that the government extend the time span of compulsory education and offer more opportunities of job training.