Measurement And Decomposition Of Income Mobility In China

As china’s economic growth, income gap is widening along with an increase in people’s income. If considering the income mobility, income distribution problem may not have been so serious. Reasonable income mobility can reduce long-term inequality, ease the income gap and promote social stability.This paper measures China income mobility from different aspects based on China health and nutrition survey dataset (CHNS) from1989to2009and analyzes the changing tendency and impact on income gap and social welfare. Empirical analysis shows that, during1989-2000, income mobility measured by income positional movement, income share movement and income level movement, is showing a downward trend after rising first. During2000-2011, income mobility measured by income positional movement is descending, income mobility measured by income level movement show a downward trend after rising first. In the long run, income mobility is decreasing in recent years, and the income mobility in rural is greater than urban, on the contrary the directional income mobility in rural is less than urban. Though income mobility reduces the long-term inequality and improves the social welfare, the function is declining.We decompose the income mobility by Kerm (2004), the main source of income mobility is the exchange mobility, changes of income rank are the main reason for the changes in mobility. After considering the direction of income mobility, the contribution of exchange mobility is declining and the contribution of grow mobility is bigger. Rural have greater downward income mobility than urban areas, and urban grow mobility is greater than rural areas, which leads to the directional income mobility is positive. The subgroup decomposing results of the directional income mobility show that the first and second income groups contribute most to the total income mobility and rural is greater than urban. Keeping the incomes of the first-income group stability and improving the upward income mobility will be help to reduce income gap.Multinomial logistic regression model results show that the income mobility has the characteristic convergence to equilibrium level. Sex, age, areas and insurance have a significant effect on income mobility. At the same time, the higher level of education they have the individual income is more difficult to flow down. In addition, the difference of individual professional characteristic has a great influence on the income mobility. In rural areas, the men at the state, organization of Party, enterprises, institutions, professional and technical personnel, clerk and related workers, workers of commercial, service industry and so on have more smaller downward income mobility than production personnel whose work are related to agriculture, animal husbandry, fishery, water conservancy. In urban areas, the men at the state, organization of Party, enterprises, institutions, workers of commercial, service industry, production personnel whose work are related to agriculture, animal husbandry, fishery, water conservancy and so on have less opportunity to flow up to higher ranks than workers professional and technical personnel. While workers of commercial, service industry and operators of production, transport equipment and related workers is easier to flow down to lower ranks than workers professional and technical personnel.Only accelerating the reform of income distribution system and gradually improving the system of education and social security system, increasing the income of low-income groups, controlling the excessive growth of high-income groups, breaking income stratification, promoting the reasonable income position mobility and income level mobility, we can effectively ease the widening of income gap and improve the level of social welfare.