What's happened to educational mobility in China?

China has achieved unparalleled success in economic growth and poverty reduction since initiating market reform in 1978. But in recent decades, increasing inequality has become a central policy issue (Figure 1), and the goal of ‘harmonious development’ has become a focus of Chinese policy makers. It remains a challenge for China to share its prosperity more equitably.

Education is widely considered among the most important policy instruments to improve economic mobility of children from disadvantaged socio-economic backgrounds. Policy must address income inequality stemming from inequality of economic opportunities. Analyzing the effects of economic reform on educational mobility is thus central to better understanding the nature of inequality during the reform era. Did market reform expand the educational opportunities of children compared to their parents who went to schools before 1978? In a recent paper (WPS 7459), Shahe Emran and I investigate the role of family backgrounds in generating and sustaining educational inequality. Our analysis focuses on rural areas, where most of the poor households in China live.

In an earlier paper (WPS 7316) we report evidence that parental education has a positive impact on children’s schooling in rural China. Although standard in the literature on intergenerational educational mobility, the effects of parental education on children’s education provides an incomplete picture of the influence of family background, since it ignores other important indicators of permanent income such as parent’s occupation readily available in household surveys. Our earlier analysis finds that occupational mobility from agriculture to non-farm has improved dramatically over the reform period in rural China. Relying exclusively on parental education as the sole indicator of socio-economic status could thus be seriously misleading in the context of rural China experiencing significant structural change in favor of non-farm sector. The evidence is convincing that the non-farm occupations yield higher household income in the post reform period. Since panel data on parental income covering the lifecycle are not available, we exploit both parents’ education and occupation to construct a broader measure of a household’s economic status, and analyze the implications of the expansion of non-farm occupation for educational mobility of children.

Background

China’s rural economy experienced fundamental structural transformation over the reform period, with impressive growth in non-farm employment. The share of non-farm sector in household income increased from 22 percent in 1980 to 51 percent in 2001. The role of high income non-farm occupations became increasingly important after the fiscal decentralization in China, which tightened the link between parental income and children’s opportunities.

Potentially important interactions between education and non-farm occupations which exacerbate inequality exist. Educated families in rural China were able to respond to non-farm opportunities more quickly and earned higher income.Children born to these parents enjoyed cumulative advantage in education (e.g., adequate investment in education, better school, home teaching etc.), while the children of uneducated farmers were trapped in low educational attainment such as lack of access to schools, and insufficient investment in education due to poverty. Positive feedbacks between non-farm occupation and higher education can lead to a bifurcation in educational attainment, and widen income inequality.

Findings

Our research results reveal substantial heterogeneity across occupations within a given education group and across education levels within a given occupation group. We find that the standard model of intergenerational educational mobility misses substantial heterogeneity due to parental occupations. It helps us to understand the role of non-farm occupations in educational inequality in rural China. For example, within the low education sub-sample, a son attains about 0.80 years of additional schooling when born into a non-farm household compared to a farm household, and the corresponding gain in schooling for a girl is about 0.60 years.

While having a non-farmer parent, in general, improves educational attainment, it does not present any advantages for the children of uneducated non-farmers over the more educated farmer parents, even though nonfarm households have significantly higher income. Our analysis thus reveals that educational inequality among the children is not solely a poverty problem in rural China.

Second, we find little evidence of complementarity between parental education and occupation in determining the educational attainment of the children. This contradicts widely held perceptions.

Third, a comparison of parents’ and children’s generations shows that despite impressive income growth and poverty reduction, the children in post-reform China face lower educational mobility compared to their parents. There are gender differences in educational mobility across three generations: for girls, the role of family background in schooling attainment remains largely unchanged (or somewhat worsened) across pre- and post-reform generations. But for boys, family background has become much more important in the reform era. This decline suggests that the increasing inequality in the post-reform period reflects deeper inequality in opportunities and thus require appropriate policy interventions.

The increasing importance of parents’ economic status in sons’ educational attainment reflects the consequences of a host of factors during the reform era. First, the returns to education have been increasing over the reform period, especially for boys. Second, the investment in sons’ education may be reinforced by son preference and the reliance on a son for old age support. Third, fiscal decentralization compelled the schools in poorer counties to impose a varieties of fees on the households, making parental permanent income especially important.