Does government education expenditure boost intergenerational mobility? Evidence from China

This article assesses the relationship between government education spending and intergenerational mobility using parent-child pair information from the China Family Panel Studies (CFPS) and data on government education expenditure from the China Educational Finance Statistical Yearbook, Provincial Statistical Yearbook and China City Statistical Yearbook. We introduced family classification (chengfen) as the instrumental variable for permanent income and used child income for the age bracket 23-40 as the approximation for lifetime earnings to minimize estimation bias. We found that the intergenerational elasticity in China is about 0.384 and the government education expenditure boosted the intergenerational mobility. Moreover, we estimated the absolute mobility in China. And our analysis pointed to the importance of government spending in increasing the intergenerational mobility of underdeveloped family and improving equality of opportunity in China.