The Impact of Intergenerational Transmission of Human Capital on Social Mobility – A Theoretical and Empirical Investigati
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| Title | The Impact of Intergenerational Transmission of Human Capital on Social Mobility – A Theoretical and Empirical Investigati
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| Author | Qin Xuezheng and Wang Tianyu |
| Organization | School of Economics, Peking University |
| Email | qin.econpku@gmail.com,wangtianyu@pku.edu.cn |
| Key Words | Human Capital; Social Mobility; Intergenerational Transmission |
| Abstract | This paper provides a theoretical and empirical framework to analyze the impact of intergenerational transmission of human capital on income mobility in China. Our theoretical model incorporates the direct transmission of human capital into a 3-period overlapping generation (OLG) model, and finds that the direct transmission mechanism has a remarkable impact on parents’ human capital investment on their children and the intergenerational elasticity of income. In the empirical analysis, we estimate a simultaneous equation model to verify the theoretical prediction using the 1989-2009 China Health and Nutrition Survey (CHNS) data. The results show that human capital, measured by health and education, is largely transmitted from one generation to the next, which reflects the parent-induced inequality of development opportunity among the offspring. Moreover, the estimated intergenerational income elasticity increases from 0.383 to 0.480 when the direct transmission of human capital is taken into consideration, which indicates that omitting this mechanism would over-estimate China’s social mobility. Our findings provide policy implications on strengthening the human capital investment among disadvantaged groups, reinforcing reforms that promote equality of opportunity, and improving the efficiency of labor markets. |
| Serial Number | WP616 |
| Time | 2014-08-05 |
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