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| Common Prosperity, Trade Openness, and Intergenerational Income Mobility in China |
| WEI Hao, YANG Mingming, LI Shi
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Business School, Beijing Normal University;
School of Public Affairs, Zhejiang University |
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Abstract In recent years, the Chinese government has accelerated the promotion of common prosperity. However, China's intergenerational income elasticity has increased; moreover, the intergenerational income mobility shows a downward trend, indicating that the problem is relatively prominent. Thus, the issue of China's intergenerational income inequality needs to be urgently solved. China is unswervingly promoting high-level opening to the outside world, especially foreign trade. Therefore, one must consider the realistic background of China's high-level opening when studying intergenerational income inequality.
This study assesses (1) the changes in China's intergenerational income mobility, mainly focusing on changes in the influence of parental income on the offspring's income in the context of trade opening and (2) whether the effects of trade openness on intergenerational income mobility vary according to the parents' and offspring's characteristics. Judging from the original intention of the trade-opening policies and their positive effects, these policies have strengthened China's economic and trade exchanges with the international market; expanded the scale of China's import and export of goods and services; increased employment in the labor market; provided more opportunities for fair job selection; effectively increased citizens' income levels; and improved society's quality of life and overall welfare. As a new labor force entering the market, younger generations, as compared with their parents, can better enjoy the positive results of trade openness, including good economic growth, a broad international exchange platform, a fair environment for job selection and employment, and diverse promotion and development opportunities. Trade openness can affect the intergenerational income mobility by increasing the offspring's income levels and altering the intergenerational income elasticity.
The empirical results show that, overall, trade openness has significantly promoted China's intergenerational income mobility (particularly the upward intergenerational income mobility). Moreover, compared with export trade opening, import trade opening has had greater and more significant effects on intergenerational income mobility. A test of the impact mechanism shows that trade openness has improved the intergenerational income mobility primarily by promoting the upward mobility of intergenerational education and occupation. The effects of stimulating enterprise innovation and increasing the offspring's personal efforts are not significant. Trade openness has significantly improved the intergenerational income mobility of male offspring with lower education levels; however, it has had no significant impact on the intergenerational income mobility of female offspring as a whole or male offspring with higher education levels. Furthermore, trade openness has significantly improved not only the intergenerational income mobility of the male offspring in urban households but also that of those in rural households; however, trade openness has had no significant effects on the intergenerational income mobility of the female offspring in either urban or rural households. Finally, trade openness has significantly improved the intergenerational income mobility of low-income households but has had no significant impact on the intergenerational income mobility of low-income and middle-income households, middle-income households, upper middle-income households, or high-income households. Thus, trade openness has reduced the impact of the father's income on the offspring's income in low-income households, thereby significantly improving the intergenerational income mobility of low-income households, and is more conducive to the offspring of low-income households as well as male offspring to the upward mobility.
This study makes several contributions to the literature. First, existing studies mainly focus on the income and employment effects of trade and deal with the direct benefits and short-term effects of trade. By contrast, the present study extends to intergenerational income mobility, analyzes the indirect benefits and long-term effects of trade, broadens the scope of research on trade benefits, and greatly contributes to the research on trade and income issues. Moreover, this study examines the in-depth effects of trade openness on intergenerational income mobility and reveals underlying associated mechanisms. The study findings not only supplement and enrich the relevant research on the factors of intergenerational income mobility from the perspective of trade openness but also provide a new theoretical basis and policy guidance to explore how to improve the intergenerational income mobility to promote common prosperity. Finally, this study uses the latest CHIP data to analyze the effects of China's trade opening on intergenerational income mobility over a longer duration and employs various methods to perform robustness tests. Moreover, the study conclusions are more scientific and reliable and have more practical significance in guiding current policy adjustments.
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Received: 13 October 2021
Published: 01 September 2022
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