The Influence Of Income Inequality On Intergenerational Income Mobility In China

Since the reform and opening 40 years ago,Chinese economy has continued to develop rapidly and the per capita income has been continuously improved.However,at the same time,the gap between the rich and the poor is growing.China's Gini index has been above 0.45 since 2003,exceeding the international warning line,indicating that the gap between the rich and the poor in China is large,the rich have more resources to have greater rights,and the development opportunities of the poor are limited.The widening income gap has led to serious unequal resource allocation.High-income families have more economic resources and social relationships,that help their children to obtain better educational resources and educational environment,provide better employment opportunities for their children,and increase the possibility that children are still in a higher economic position.Because of the constraints of economic resources and social relations,low-income families are difficult to provide good resources for their children,resulting in their children may continue to be in a lower economic position,and poverty is transmitted between generations.China's income gap has widened,and the problem of inequality has become prominent.The solidification of social classes and the slowdown of intergenerational flows have become an indisputable fact.It can be seen that there may be a specific link between income inequality and intergenerational income mobility.In recent years,foreign scholars have done a lot of research on the relationship between income inequality and intergenerational income mobility,and have obtained many valuable research results,while domestic scholars have relatively little research on the relationship between the two.In view of this,this paper explores the specific effects of income inequality on intergenerational income mobility in China,and attempts to provide a new perspective for domestic intergenerational income mobility research,enriching domestic relevant literature.In addition,It provides evidence for the government to formulate relevant policies that is conducive to the improvement of intergenerational income mobility in China,and is conducive to further promoting the harmonious development of society.Research has certain practical significance.In order to verify the specific impact mechanism of income inequality on intergenerational income mobility in China,this paper firstly uses Duncan's(1966)path theory as the formal theoretical framework for studying the impact of income inequality on intergenerational income mobility.Studies have shown that income inequality can have an impact on intergenerational income mobility through three paths,which is the distribution of the offspring skills related to the father's income,the skill transfer rate and the skill return rate.Since the offset effect may occur regardless of whether it is along a single intergenerational path or across multiple intergenerational paths,the net impact of income inequality on intergenerational income liquidity is uncertain,and the increase in income inequality may inhibit or promote or do not change the mobility of intergenerational income.The paper discusses the different effects of income inequality on intergenerational income mobility,and points out the possible causes and cbrresponding transmission pathways.Since the net impact of income inequality on the intergenerational income mobility is uncertain,it is necessary to empirically analyze the specific situation of China,and put forward the empirical research method of this paper before the empirical analysis.Considering that there are some differences in the intergenerational income mobility among different provinces and years,this paper uses the Random Coefficient Model proposed by Bloome(2015)to allow intergenerational income elasticity to vary with income inequality and other unobserved province-year information,which is more suitable for reality.Moreover,the intergenerational income elasticity obtained by the Random Coefficient Model is the Optimal shrinkage estimator,which reduces the mean square error and increases the estimation accuracy.Considering the robustness,this paper also tests the estimation results of simple OLS model with interactive terms and Fixed-effects Model.In the empirical part,firstly,this paper uses the CHNS data and use the simple OLS model,the Fixed-effects model and the Random Coefficient model to systematically measure the intergenerational income elasticity,and then analyzes the trend of the inter-generational income elasticity.Secondly,this paper uses the simple OLS model,the Fixed-effects model and the Random Coefficient model to test the specific impact of income inequality on intergenerational income mobility and discuss possible causes.Considering robustness,control variables,income levels,and mobility are measured and processed in a variety of ways.Finally,using the Random Coefficient model to discuss the urban-rural differences,regional differences and stratum differences in the effects of income inequality on intergenerational income mobility.This paper draws the following conclusions:First,the average intergenerational income elasticity estimated by the Random Coefficient model is 0.4255,which is lower than the simple OLS model.When the father's income is adjusted according to the size of the family,the estimated elasticity of each model is improved,and the intergenerational income mobility is weakened when considering the size of the family.Second,from 1991 to 2011,China's intergenerational income elasticity ranged from 0.3402 to 0.5383,showing a trend of rising first,then falling,and rising.It reached its peak in 2004 and is still at a relatively high level.Third,China's current income inequality has a significant positive net effect on intergenerational income elasticity.The rise in income inequality will eventually hinder intergenerational income mobility.Fourth,the impact of income inequality on intergenerational income mobility has urban-rural differences,regional differences,and stratum differences.The increase in income inequality will eventually promote the intergenerational income mobility of urban residents and inhibit the intergenerational income mobility of rural residents;The increase of income inequality will eventually promote the intergenerational income mobility of residents in the eastern region and inhibit the intergenerational income mobility of residents in the central and western regions.However,for the northeast region,the net impact of inequality on intergenerational income liquidity is uncertain.There is a countervailing effect;the increase in income inequality will eventually promote the intergenerational income mobility of the middle-income class and inhibit the intergenerational income mobility of the low-income and high-income groups.This paper is innovative.The paper uses panel data while taking into account of time and regional factors,covers more information and makes the conclusions more convincing.Considering the difference in intergenerational income mobility in different provinces and years,and varying with income inequality and other unobservable province-year information changes,the Random Coefficient model is used to test the impact of income inequality on intergenerational income mobility.Not only the mean square error is reduced,but the accuracy of the estimation is greatly improved,and it is more practical.