Intergenerational income persistence and transmission mechanism: Evidence from urban China

In this paper I investigate the intergenerational income association and its transmission channels amid China's economic transition period using urban data from the Chinese Household Income Projects in 1995 and 2002. The estimated intergenerational income elasticity is 0.43 and 0.51 for cohorts educated prior to and after the market reform respectively, and reaches 0.71 among households with above average income in the post-reform era. Besides the conventional channel of education, this paper estimates the contribution from social capital and ownership of work unit across cohorts and income groups. There is weak evidence that prior to market reform, ownership of work unit contributes most to the intergenerational income persistence for households with below average income, while social capital leads the three contributors in households with above average income. However, in the post-reform era, parents with below average income invest statistically significantly in children's education which contributes most to the intergenerational income persistence. The leading contributor in families with above average income shifts to social capital. Possible explanations for such a shift lie in the ability and incentive of parents from different income categories to invest in their children. The results are tested through a series of robustness checks, and provide empirical support for promoting policies on the equality of opportunity.     

Intergenerational income mobility and economic freedom

Numerous studies have found that income inequality reduces the chances of upward relative mobility (i.e., climbing up the income ladder). However, most of this work ignores the role played by institutional quality (namely, economic freedom) in determining mobility and increasing the individual's set of choices. We fill this gap by empirically testing the direct and indirect (through economic growth) impacts of economic freedom on intergenerational income mobility. We find that economic freedom has both direct and indirect effects on intergenerational income mobility, while income inequality is a strong predictor of downward income mobility. When we incorporate findings about the purely mechanical relationship between inequality and intergeneration income mobility, we find that the legal system and property rights component of economic freedom matters more than inequality. These results suggest that good institutions can increase intergenerational income mobility.     

Firm-level human capital and innovation: Evidence from China

This paper examines the role of human capital in firms' innovation. Based on a World Bank survey of manufacturing firms in China, we use two firm-level datasets: one from large metropolitan cities, and one from mid-sized cities. Patents are used as an indicator of innovation. The human capital indicators we use include the number of highly educated workers, the general manager's education and tenure, and the management team's education and age. We use the Negative Binomial and Instrumental Variables estimators to estimate patent production function models that are augmented by our human capital variables. We also use the zero-inflated Negative Binomial model to examine the likelihood of innovation. We find that the human capital indicators play an important role in influencing patenting, and that some of the human capital variables appear to have a greater impact on patenting in mid-sized cities. Our human capital estimates are obtained after controlling for firms' R&D, size, market share, age, and foreign ownership, as well as fixed effects to control for industry-specific characteristics, and firms' location and geography.     

The impact of foreign direct investment and human capital on economic growth: Evidence from Chinese cities

Using a panel of Chinese cities over the period 1991–2010, we examine the determinants of economic growth, focusing on the role of foreign direct investment (FDI) and human capital. Consistent with the predictions of a human capital-augmented Solow model, we find that the growth rate (along the path to the steady-state income level) of per capita GDP is negatively correlated with population growth rate and positively correlated with investment rate in physical capital and human capital. We find that FDI has a positive effect on the per capita GDP growth rate and this effect is intensified by the human capital endowment of the city. The latter suggests that one way that human capital contributes to growth is to serve as a facilitator for technology transfers stemming from FDI. Furthermore, we find some suggestive evidence that the FDI-human capital complementary effect is stronger for technology-intensive FDI than for labor-intensive FDI. Our results are robust to alternative measures of human capital, model specifications, and estimation methods.     

The impact of education on income inequality and intergenerational mobility

This paper analyses the effects of innate ability, compulsory education (grades 1–9), and non-compulsory education (grades 10–12 and higher education) on inequality and intergenerational mobility of income, by constructing a four-period overlapping-generation model. We find that innate ability and family investment in early education play important roles in explaining income inequality and intergenerational income mobility. Though children from the wealthiest families are only 1.36 times ‘smarter’ that those from the poorest, the gap in human capital expands to 2.35 at the end of compulsory education and to 2.89 at the end of non-compulsory education. One important reason for the increase is that poor families invest relatively less in children's early education than do wealthy families; therefore, their children attend lower-quality schools, which results in them being much less likely to participate in higher education. By simulating policy experiments for different types of government education expenditure, we find that direct subsidies to poor parents are the most efficient and effective policy for mitigating poor families' budget constraints with regard to early-education investment in their children.     

The impact of agricultural technology adoption on income inequality in rural China: Evidence from southern Yunnan Province

This study analyzes the impact on income inequality of government efforts to increase agricultural incomes in rural China. It collects and analyzes survey data from 473 households in Yunnan, China in 2004. In particular, it investigates the effects of government efforts to promote improved upland rice technologies. Our analysis shows that farmers who adopted these technologies had incomes approximately 15% higher than non-adopters. Despite this relatively large increase, we estimate that the impact on income inequality was relatively slight. This is primarily due to the fact that lower-income farmers adopted the improved rice technology at rates that were roughly equivalent to those of higher-income farmers.     

The determinants of capital structure: Evidence from China

This paper employs a new database containing the market and accounting data (from 1994 to 2003) from more than 1200 Chinese-listed companies to document their capital structure characteristics. As in other countries, leverage in Chinese firms increases with firm size and fixed assets, and decreases with profitability, non-debt tax shields, growth opportunity, managerial shareholdings and correlates with industries. We also find that state ownership or institutional ownership has no significant impact on capital structure and Chinese companies consider tax effect in long-term debt financing. Different from those in other countries, Chinese firms tend to have much lower long-term debt.     

The unreported income and its impact on Gini coefficient in China

ABSTRACT

Unreported income is an important factor that distorts China’s household income accounting and Gini coefficient calculation. On the basis of comparing NBS household survey data and data from China’s Cash Flow Statement, this paper estimates the size and structure of unreported income in China over recent years. Our study found that about 20% of household disposable income has not been covered by existing household surveys in recent years. In 2015, the omission rate was 19.5%. Operating income and property income have the highest omission rates. Considering that unreported income is primarily owned by high-income people, China’s falling Gini coefficient since 2009 may have resulted from the statistical omission of partial incomes of high-income group. If unreported income is re-included, China’s Gini coefficient would increase by 10 percentage points rather than decrease.     

我国企业人力资本参与企业收益分配的几个误区

我国虽然已经进行人力资本参与企业收益分配多种尝试,但是中国并不适合于全面推行人力资本参与企业收益分配。这是因为我国刚刚步入工业化中期阶段,人力资本还没有完全作为一种独立的资本形态出现,有限责任制度难以真正实现,企业治理结构还处于构建之中。从我国人力资本参与企业收益分配的实践看,由于种种原因,我国企业在实施人力资本参与企业收益分配过程中存在误区。     

Export expansion and intergenerational education mobility: Evidence from China

This paper investigates the impact of China's export expansion during 2000–2007 on the local intergenerational education mobility. We construct prefecture-level export shocks, by exploiting variations in national cross-industry export changes and cross-prefecture industrial employment. Empirical results suggest that prefectures experiencing larger export shocks are more likely to have higher intergenerational education mobility. The baseline results stand when we use alternative measures for educational outcomes, consider the migration situations, or include more controls. Using the intergenerational mobility framework proposed by Becker et al. (2018), we explain and empirically test how income effect and substitution effect of export expansions influence education mobility. The mechanism testing suggests that the income effect is the dominant force underlying the results.     

A cointegration approach to capital mobility: Evidence for Belgium

This paper provides a method for measuring capital mobility through the analysis of causality direction between the exchange rate and the interest rate. Empirical evidence is provided for Belgium. Cointegration and Granger causality tests show that the direction of causality between both variables reverses in 1979 when an increase in the degree of European financial integration took place.     

Measurement of relative welfare poverty and its impact on happiness in China: Evidence from CGSS

Individual or household income has been the conventional yardstick of poverty. Presently, non-income factors are universally accepted as measures of poverty. Attention on the multiple dimensions of poverty and their policy implications has been growing in the past 20 years. However, few studies have analyzed relative multidimensional poverty, especially in China. Moreover, the relationship between relative welfare poverty and happiness has been rarely studied, particularly given that the decline of poverty seemed not bringing a significant increase in happiness in China. This research gap is noteworthy because enhancing the subjective well-being of the people is crucial to a nation's sustainable economic development. On the basis of the micro-level data from China General Social Survey, this study puts forward a welfare approach to analyzing the relative multidimensional poverty and then determines the link between relative welfare poverty and individual happiness. Our results show that 1) relative welfare poverty has not declined significantly and 2) there is a significantly happiness-reducing effect of relative welfare poverty.     

Industry-specific human capital and the wage profile: Evidence from Taiwan

Using data from Taiwan's Manpower Utilization Survey (1979–2000), this paper finds evidence that supports the industry-specific human capital effect on wage tenure profiles. Work experience is used as an indirect measure for testing industry-specific human capital by comparing the effect between stayers and movers. Other things being equal and holding firm tenure constant, movers actually incur a wage loss measured by the wage premium of the work experience. However, a greater than average firm tenure effect, especially for movers in the voluntary group, reflects an underlying job-related matching process. We also find that the effect of work experience declines with education, while the effect of industry-specific human capital increases with education. JEL no. J24, J31, J41, J62.     

Upward mobility and the demand for children: Evidence from China

This paper aims to investigate a new determinant of the demand for children: upward mobility. Upward mobility can affect the demand for children in two opposite directions: upward mobility means more resources to spend on childbearing and increases the demand for children; it also lowers the need to rely on children for old-age support and this leads to lower demand for children. In this paper, we use the difference between the subject's self-evaluations of the future and current social class as the measure of upward mobility, and fertility desire to represent the demand for children. Using the Chinese General Social Survey (CGSS) data, we find that upward mobility significantly increases the demand for children, and the results are robust across various model specifications (pooled data regression, Poisson regression, and IV regression). The effect is concentrated among affluent and/or urban households, suggesting that those from more advantaged social-economic backgrounds appear to have a higher elasticity of fertility in response to upward mobility. Our results imply that improving upward mobility and public services such as education, health care, and social security would be effective to boost fertility in China.     

福建农村人力资本水平与农民收入

采用国家统计局福建农村住户调查数据,实证分析了农户家庭人力资本水平与家庭收入之间的关系,结果表明:户主的文化程度越高,农户家庭的总收入越高,家庭收入中来自稳定的收入越多,收入来源越多样化,家庭的生活水平越稳定。随着家庭平均教育水平的提高,农户家庭的收入也不断提高,教育投资的收入弹性呈递增趋势,随着时间的推进,教育对收入的效应逐渐加大。从培训来看,接受培训的农户家庭,其收入明显高于未接受者培训的家庭的人均纯收入,而且随着家庭劳动力接受培训次数的增加,家庭收入也不断增加。     

The impact of COVID-19 on employment and income of vocational graduates in China: Evidence from surveys in January and July 2020

The COVID-19 pandemic shocked the economy of China in early 2020. Strict lockdown measures were implemented nationwide to prevent the further spread of the virus. During the lockdown period, many economic activities were affected, which had repercussions for the nation's overall employment. Vocational graduates were among the most affected by the crisis. To estimate the causal effects of COVID-19 on the full-time employment of vocational high school graduates as well as their monthly income and hours worked by week, we exploit variations in the intensity of the pandemic in time and across space using survey data from vocational schools from six provinces in China. The results of the difference-in-differences (DID) estimates indicate that being located in counties with high pandemic intensity significantly reduced both the employment in full-time jobs of vocational graduates as well as their monthly income. Our study's analysis demonstrates that the effects of COVID-19 on the labor market can be attributed to the large-scale contraction of labor demand of the enterprises that were hiring vocational graduates. To cope with this situation, vocational graduates took various measures, including reducing consumption, drawing on their savings, searching for new jobs, taking on part-time jobs, borrowing money, and attending new training programs. In addition, the empirical analysis finds that there were heterogeneous effects with respect to gender, family social capital, the industry in which the vocational graduate was participating, and whether the individual was in a management position.     

Intergenerational mobility and institutional change in 20th century China

We examine the persistence of socioeconomic status across generations, measured by educational attainment, among urban Chinese born between 1930 and 1985. The persistence of status follows a pronounced, robust U-shaped pattern, falling among cohorts educated following the Communist revolution of 1949, and rising among cohorts educated following the reforms of the late 1970s. The pattern is not driven by the Cultural Revolution or by changing associations between education and income. The U-shape also appears in complementary datasets covering rural China. We discuss the policies behind a non-monotonic relationship between educational expansion and social mobility across the institutional regimes we study.     

Human capital quality and the regional economic growth: Evidence from China

China's economic development has advanced from a high-speed to a high-quality growth stage in recent years. The optimization and upgrading of the economic structure require high-quality human capital to support an innovation-driven economy. In this paper, a general equilibrium model of human capital (Xiang & Yeaple, 2018) is applied to estimate the cognitive and non-cognitive productivities based on Chinese provincial-level macro-data and individual labor's micro-data from 2008 to 2017. The weighted power mean of cognitive and non-cognitive productivities helps calculate the provincial-level human capital quality index (HCQI), which provides a realistic estimate of human capital quality. We find that the improvement of the HCQI leads to convergence in economic growth in China's provinces. HCQI can help explain the differences in economic growth levels in different regions of China. Our study provides a constructive step in understanding cognitive and non-cognitive abilities and HCQI in China, which could help guide education investment policy in China and its provinces.     

Household appliance ownership and income inequality: Evidence from micro data in China

As the residential sector is becoming increasingly important in the total energy consumption and appliance ownership is a significant but under-examined driver, this study investigates the relationship between income inequality and appliance ownership using panel data from the China Health and Nutrition Survey (CHNS). We find that income inequality has negative impacts on appliance penetration rate across specifications, except for the initial development stage. On average, households start adopting air conditioners at a threshold of over 60,000 (2011 RMB) based on annual income, much higher than TV, fridge and washer (8500–9000 RMB). The empirical results validate the S-shape curve of appliance established in the literature. To understand the magnitude of the impact and policy implications, we further simulate the impact of poverty alleviation and the penetration paths under inclusive versus exclusive income growth. Our results demonstrate that current poverty line is too low to achieve appliance adoption – a signal for modern life-styles. In addition, a more inclusive growth path could lead to much higher penetration for regions that have relatively low growth rate.