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Intergenerational transfer of human capital and its impact on income mobility: Evidence from China

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  • Qin, Xuezheng
  • Wang, Tianyu
  • Zhuang, Castiel Chen

Abstract

This paper analyzes theoretically and empirically the impact of intergenerational transmission of human capital on the income mobility in China. We use a three-period overlapping-generations (OLG) model to show that the human capital transfer plays a remarkable role in determining the parent-to-offspring investment in human capital and the intergenerational elasticity of income. We then estimate a simultaneous equations model (SEM) using the 1989–2009 China Health and Nutrition Survey (CHNS) data to verify our theoretical predictions. The results show that (i) human capital, measured by health and education, is directly transmitted from one generation to the next, reflecting the parent-induced inequality of development opportunities among offspring in China; (ii) the estimated intergenerational income elasticity increases from 0.429 to 0.481 when the direct transfer of human capital is accounted for, suggesting that omitting this mechanism would overestimate China's income mobility. Our findings provide policy implications on strengthening human capital investments among the disadvantaged groups, reinforcing reforms that promote equality of opportunity, and improving the efficiency of labor markets in China.

Suggested Citation

  • Qin, Xuezheng & Wang, Tianyu & Zhuang, Castiel Chen, 2016. "Intergenerational transfer of human capital and its impact on income mobility: Evidence from China," China Economic Review, Elsevier, vol. 38(C), pages 306-321.
  • Handle: RePEc:eee:chieco:v:38:y:2016:i:c:p:306-321
    DOI: 10.1016/j.chieco.2014.10.005
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    Cited by:

    1. He Zhu & Tsunehiro OTSUKI, 2018. "Can Two Consecutive Generations’ Data Predict Longterm Intergenerational Transition? Evidence from China with three generations," OSIPP Discussion Paper 18E004, Osaka School of International Public Policy, Osaka University.
    2. repec:eee:chieco:v:53:y:2019:i:c:p:311-323 is not listed on IDEAS
    3. FAN, Yi, 2016. "Intergenerational income persistence and transmission mechanism: Evidence from urban China," China Economic Review, Elsevier, vol. 41(C), pages 299-314.

    More about this item

    Keywords

    Human capital; Income mobility; Intergenerational transmission; China;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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