The Research On The Impact Of ICT On Income Inequality And Intergenerational Mobility

Since China’s reform and opening-up policy introduced in 1978,economic growth has been keeping fast and people’s quality of life has been improving.However,income inequality has reached a high level during these years as well.The Gini index was 0.465 in 2019,which was significantly higher than 0.302 in European Union,0.299 in Japan and 0.340 in South Korea.Education premium,the income gap between highly educated and less educated labors,has been rising rapidly.Within-group income inequality contributes a lot to overall income inequality,accounting for about 60%of the overall income inequality.At the same time,intergenerational mobility,which measures social opportunity inequality,has been on the rise.The intergenerational mobility of those born in 1960-1990 is increasing measured with International Socio-Economic Index(ISEI)of occupation and income.Income inequality and intergenerational mobility are two important aspects of social justice.High income inequality is the result of unfair distribution of economic development.The increase in intergenerational mobility improves fairness of opportunity and alleviates the unfairness of distribution.It is necessary to explore the causes of those two.With rising income inequality and intergenerational mobility,ICT(Information and Communication Technology)has been developing rapidly,penetrating all aspects of production and people’s life in China.It also has been bringing about profound changes in labor market.This paper analyzes income inequality and intergenerational mobility from the perspective of ICT development.To be more specific,in terms of income inequality,this paper analyzes how ICT impact education premium from job task and labor mobility.Besides,this paper also explores how ICT impact within-group income inequality through price effect and structure effect.In terms of intergenerational mobility,this paper analyzes how ICT impact intergenerational occupational mobility and intergenerational income mobility through increasing the demand for high-skilled labors and renewal of knowledge.This paper provides an explanation for the causes of China’s high level of income inequality and rising intergenerational mobility.It is also helpful to explore the distribution mode under China’s development of the digital economy.This paper is divided into nine chapters.Chapter 1 is the introduction,including research questions,research goals and methods,research framework and main contents,innovations and shortcomings.Chapter 2 is the literature review,including related research on the impact of technological change on income inequality and related research on intergenerational mobility.Chapter 3 is the descriptive analysis of income inequality and intergenerational mobility in China,analyzing income inequality from the perspective of education premium and withingroup income inequality,analyzing intergenerational mobility from the perspective of ISEI and income.Chapter 4 is the theoretical analysis of the effect of ICT on income inequality and intergenerational mobility.Firstly,using task-based model and spatial equilibrium model to analyze the mechanism of the impact of ICT on education premium from the perspective of job task and labor mobility.Secondly,analyzing how ICT affect within-group income inequality through price effect and structure effect during different stages of ICT development.Thirdly,exploring how ICT impact intergenerational mobility through the demand for high-skilled labors and the substitution of new knowledge for old knowledge.In Chapter 5-Chapter 8,empirically examining theoretical hypotheses from chapter 4.Chapter 9 is the conclusions and policy suggestions.This paper draws the following conclusions:As regards to income inequality,firstly,ICT increases education premium.From the perspective of job task,highly educated labors perform more non-routine tasks and less educated labors perform more routine tasks.ICT increases education premium by increasing the return of non-routine tasks relative to routine tasks.From the perspective of labor mobility,ICT increases labor mobility.Labor inflow indirectly increases education premium through agglomeration effect.ICT increases the proportion of highly educated labors,which indirectly reduces education premium through supply effect.Secondly,there is an inverted U-shaped relationship between ICT and within-group income inequality,which is significant in urban areas but not robust in rural areas.The inverted U-shaped relationship between those two is mainly derived from bottom income inequality.ICT affects within-group income inequality mainly through price effect,and structural effect is very small.As regards to intergenerational mobility,firstly,it is found that ICT increases intergenerational occupational mobility from the perspective of ISEI.ICT promotes the probability of the upward mobility of occupation,but has no significant effect on the downward mobility of occupation.The impact of ICT on intergenerational occupational mobility is only significant in urban areas,it is not robust in rural areas.ICT enhances intergenerational occupational mobility by increasing the demand for high-skilled labors and reducing the transfer of human capital from parents to offspring.Secondly,from the perspective of income,it is found that ICT increases the intergenerational income mobility of males and people in urban areas.Its impact on females and people in rural areas is not robust.The impact of ICT on intergenerational income mobility is mainly concentrated on the middle-income class,and its impact on the lowest-income and highest-income class is not robust.Putting the demand and supply of high-skilled labors into one analytical framework,it is found that public education expenditure significantly improves intergenerational mobility in high-ICT areas;while in lowICT areas,the effect of public education expenditure on intergenerational mobility is not significant.The effect of public education expenditure on intergenerational mobility depends on the demand for high-skilled labors brought about by the development of ICT.Without the increase in demand for high-skilled labors,the effect of public education expenditure on intergenerational mobility is limited.Based on above conclusions,the policy suggestions of this paper are as follows:Firstly,increasing training for labors to improve labors’ ability to engage in non-routine tasks.Since ICT substitutes for routine tasks that are easy to be coded,and complements non-routine interactive tasks and abstract tasks,it is necessary to train labors to perform non-routine tasks to resist income inequality,structural unemployment and social instability caused by ICT.Secondly,removing the barriers to labor mobility,especially improving the mobility of highly educated labors.It could promote productivity through agglomeration effect while restraining the increase in education premium to a certain extent.Thirdly,increasing human capital investment.Not only increasing investment in observable skills,but also increasing the supply of unobservable skills,such as leadership,organization and coordination skills,as well as teamwork skills,to alleviate income inequality caused by technology development and increase intergenerational mobility.Fourthly,increasing public education expenditure for low-income families.Low-income families are more likely to encounter intergenerational transmission of disadvantage because of budget constraint.Increasing public education expenditures for them can alleviate the disadvantage of human capital accumulation of low-income families,promote equality of social opportunities,and help to increase the skill supply of the whole society.Lastly,promoting the development of ICT in rural areas.The government should notice the uneven development of ICT in urban and rural areas.It is necessary to invest in ICT infrastructure and accelerate the development of ICT in rural areas.At the same time,improving skills of labors to use ICT in rural areas to improve income of people in rural areas,so that rural areas can also share the dividends of ICT development.