The Effects Of Chinese Household Financial Assets On Intergenerational Income Mobility

Transmission of intergenerational income refers to the correlation between theincome of children and the one of their parents, which is mainly measured throughintergenerational income mobility. The concept of intergenerational income mobility isput forward by Francis Galton in the19th century, intergenerational income mobilityrefers to the changes that the children’s income level relative to the parents’ incomelevel. If the intergenerational income mobility is higher, it means that the income ofchildren mainly depend on their ability, rather than depend on their parents’ socialbackground. Higher intergenerational income mobility is a reflection of social justice,and it’s also the premise of efficient running of economy. The research ofintergenerational income mobility in China began in the90s, previous studies havefocused on the explanatory factors to the intergenerational income mobility, such as thechildren’s education, health and growth environment, while ignoring the familyfinancial assets. With the continuous development of China’s financial markets andinnovation of financial tools, great changes have taken place in the composition ofthe wealth of families. Family income is not merely determined by the parents’ salaryincome, but also largely depends on the family property incomes from the financialassets. Therefore, the influence of family financial assets on family income will exert asignificant impact on children’ income through the intergenerational transmissionmechanism. At the same time, the scale of borrowing funds market and lending way inchina both present the trend of annual increasing. Therefore, poor family could get theeducational funds of offspring from the borrowing funds market to change the child’sability which could help them to obtain income in the future. In addition，report of theEighteenth National Congress of the Communist Party put forward the politicalproposal of increasing proprietary individual income through multiple channels, thatmainly includes financial products investment and industrial investment, leasing service.Therefore, the research results of this article coincided with the political proposal. Thus,the study on the intergenerational income mobility based on family financial assets alsohas the strong practical significance.This paper is on the basis of the existing researches on the intergenerationalincome mobility, then combines with the present situation of our country(rapid development of financial market, continuing boom of the real estate market, gradualimprovement of the money lending market). Four kinds of family financial variables(family real estate values, family financial assets, family loan, family debts) and humancapital investment are introduced into the model of intergenerational income mobility toexamine its explanatory power on intergenerational income mobility and its internaltransfer mechanism. Firstly, this paper mainly studies how the explanatory power offive kinds of family variables on intergenerational income mobility in our country,namely studying the influence degree that the five kinds of family variables exert on theintergenerational income mobility in our country. Then, this paper mainly studies theexplicable proportion of intergenerational income elasticity and their respectivecoefficients of investment and return through decomposing the internal mechanism ofintergenerational income mobility. Thereby we could quantificationally analyze theinfluence degree that these variables exert on the intergenerational income mobility inour country. Finally, this article carries on the study and analysis of nonlinear about theintergenerational transmission of the family financial assets to test the differentinfluence degrees that these variables exert on different levels of children’s incomes,namely the different coefficients of return. Through the corresponding empiricalresearch and analysis, this paper gets the following conclusion. First, the explanatorypower of family estate values and family loan that exert on the intergenerational incomemobility mainly presents the increasing tendency year by year. The explanatory powerof family human capital investment that exert on the intergenerational income mobilitymainly increases initially and decreases afterwards. The explanatory power of familyfinancial assets that exert on the intergenerational income mobility is large and stable.But the explanatory power of family borrowing that exert on the intergenerationalincome mobility declines slightly in recent years. Second, the explicable proportion ofintergenerational income elasticity of the family estate values and human capitalinvestment is large. The explicable proportion of intergenerational income elasticity offamily financial assets remains at the level slightly more than10%. The explicableproportion of intergenerational income elasticity of family loan presents the increasingtendency year by year. The explicable proportion of intergenerational income elasticityof family debts mainly presents a trend of weakening year by year. And the totalexplicable proportion of the five kinds of family variables mainly presents a trend ofincrease year by year. Third, the family estate values have the significant influence onthe low income level, middle income level and above average income level of children, but to some extent, the influence on the high income level of children declines. With theincrease of children’s income, the influence that the family financial assets exert on thechildren’s income is becoming stronger. With the increase of children’s income, thereturn coefficient of family loan is getting higher, and its significance is strong. Familydebts have significantly negative influence on the high children’s income level, but noton the low children’s income level. Family human capital investment has significantlypositive influence on all children’s income level. And the influence on middle incomelevel is stronger than the high income level and low income level. Father’s householdsituation has significantly negative influence on the low level of children’s income, butnot on the high level of children’s income. Father’s Political identity has significantlynegative influence on the low level of children’s income, but not on the other level ofchildren’s income. Father’s working of the state-owned property has significantinfluence on the low level of children’s income, but the influence on the high level ofchildren’s income has a certain degree of diminished. However, Father’s working of theprivate property shows no significant influence on all level of children’s income.On the basis of existing researches, this paper mainly has the following innovationpoints. Firstly, on the basis of the rapid development of the financial market, the realestate market and money lending market in china, this paper carries family real estatevalues, family financial assets, family loan, family debts, human capital investment asthe important variables into the model of intergenerational income mobility. Secondly,based on studying intergenerational income mobility from linear perspective, this paperconsiders the nonlinear problem of intergenerational income mobility of familyfinancial variables, and uses the quantile regression model to analyze the influence thatthe five kinds of family variables and father’s characteristics exert on different levels ofchildren’s income.