How does education affect intergenerational income mobility in Chinese society?

• Published date: 01 May 2022
• Author: Shu Wang,Xiao Yu,Kuo Zhang,Jipeng Pei,Karlis Rokpelnis,Xuelong Wang
• Date: 01 May 2022
• DOI: http://doi.org/10.1111/rode.12863

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     wileyonlinelibrary.com/journal/rode  Rev Dev Econ. 2022;26:774–792.

© 2022 John Wiley & Sons Ltd

Received: 9 November 2017 

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  Revised: 3 January 2022 

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  Accepted: 12 January 2022

DOI: 10.1111/rode.12863  

REGULAR ARTICLE

How does education affect intergenerational

income mobility in Chinese society?

ShuWang1,2

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XiaoYu1,2

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KuoZhang1

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JipengPei1

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KarlisRokpelnis3

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XuelongWang4

Shu Wang and Xiao Yu are co- first authors. 

1School of Economics, Minzu University 

of China, Beijing, China

2China Institute for Vitalizing Border 

Areas and Enriching the People, Minzu 

University of China, Beijing, China

3College of Life and Environmental 

Sciences, Minzu University of China, 

Beijing, China

4Industry Development Department, 

Shenzhen Guangming Science City 

Industrial Development Group Co, Ltd, 

Shenzhen, China

Correspondence

Xuelong Wang, Industry Development 

Department, Shenzhen Guangming 

Science City Industrial Development 

Group Co., Ltd, Shenzhen, China.

Email: xuelong_wang@qq.com

Funding information

This research is fully funded by the 

China Postdoctoral Science Foundation 

(fund no. 2018M640156) and the 

National Ethnic Affairs Commission of 

the People's Republic of China (Training 

Program for Young and Middle- Aged 

Talents, no. 2020000219); the research 

is also supported by The Fundamental 

Research Funds for the Central 

Universities (fund no. 2021JDZC08). The 

authors are responsible for errors of this 

article

Abstract

Education has  been proved  to be  one of the most im-

portant variables  influencing intergenerational income 

mobility. Existing literature decomposes the indirect ef-

fect of education  on intergenerational income mobility 

into  two  components:  the  effect  of  the  correlation  be-

tween a parents’ income and their children’s education, 

and the effect of  the return to education. Basing on  the 

framework of existed studies, this paper explores a ben-

eficial application to measure the two components, and 

checks which effect is more important in explaining the 

inter- generational income  mobility in Chinese  society. 

Using data from the China Health and Nutrition Survey 

(CHNS),  the  research  analyzes  how  education  affects 

inter- generational income  mobility,  and  estimates  the 

respective contributions of the two effects of education. 

The empirical results  show that the effect  of education 

is of importance in explaining  the increase in the inter-

generational  income  correlation  for  1960s,  1970s  and 

1980s of  Chinese age groups. Meanwhile,  after decom-

posing the effect of education, we find that the return on 

education has stronger  explanatory power on intergen-

erational income mobility than the correlation between 

a father’s  income and his child’s  education. Therefore, 

the return  to education  should be  the center  of policy 

design for the Chinese government.

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WANG et al.

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INTRODUCTION

Education is one of the most important variables influencing intergenerational income mobility 

(Gregg et al.,2019;  Piopiunik,2014; Solon, 1992). The  influence of  education on intergenera-

tional income  mobility has been  divided into  the direct effect  and the indirect  effect (Black & 

Devereux,2011). The direct effect of education means that parents transmit ability to children di-

rectly through nurture and genes (Black etal.,2009; Solon,1999). The indirect effect of education 

means that  parents influence variables  related to children's education,  such as  the investment 

in children's education and the  related educational environment (Becker etal.,2018; Heckman 

& Mosso,2014). The indirect effect of education on intergenerational income mobility  depends 

on two factors: (1) the correlation between parents’  income and their children's education  and  

(2) the return to education (Bowles & Gintis,2002).

Recent literature has put great emphasis on the intergenerational income mobility, especially 

from the perspective of  education, while most scholars believe that education is a crucial  deter-

minant in explaining  the intergenerational income mobility (Yang & Qiu, 2016). However, it is 

uncertain which factor of education is more important in affecting intergenerational income mo-

bility. In this research, we focus on the indirect effect of education, which could be decomposed 

into the effect of the correlation between parental income and the child's education and the effect 

of the return on  investment education. We use the  China Health and Nutrition Survey (CHNS) 

data and divide observations into three age groups (born in the 1960s, 1970s, and 1980s)  for em-

pirical analysis. The empirical results show an increasing trend in  the intergenerational income 

correlation from the 1960s to the 1980s, and education is important in explaining the intergener-

ational income correlation for the Chinese society due to the continuous increase in the return to 

education rather than the correlation between a father's income and his child's education.

The main contributions of this study comprise two points. On the one hand, our research is a 

new and beneficial application to measure the two effects  of education based on the framework 

of Bowles and Gintis (2002). The debate on the theoretical  model of education effect decompo-

sition is a general discussion, which may have wide applicability, and helps scholars distinguish 

the contribution of  the two factors of educational indirect effect. On the  other hand, we believe 

that this study has a certain theoretical contribution. By employing the Chinese  survey data, we 

investigated the indirect effect of education on intergenerational income mobility under China's 

social context  and successfully  reinforced several classical  theories and  conclusions that  were 

proposed by economists, concluding that certain conclusions on how education affects intergen-

erational income mobility might also apply to China.

The remainder of  the paper is organized as follows. Section2  reviews the existing literature, 

Section3 provides a  brief introduction to the Chinese  educational system, Section4 introduces 

the data and variables, Section5  presents the methodology, Section6 provides the empirical  re-

sults, and Section7 concludes the paper.

KEYWORDS

China, decomposition, intergenerational income mobility, the 

indirect effect of education, the return to education

JEL CLASSIFICATION

J62; J58; I21