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Prevalence of SOEs and intergenerational income persistence: Evidence from China

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  • Haichao Fan
  • Zheng Fang
  • Bihong Huang
  • Mohan Zhou

Abstract

This paper evaluates the impact of state‐owned enterprises (SOEs) on intergenerational income persistence in China. Using population census, we first estimate the intergenerational income elasticities (IGEs) across Chinese prefecture‐level cities. We then find that the prevalence of SOEs in a city is negatively associated with its IGE. The estimation using the geographic variation in SOEs created by the ‘156 Projects’ as an instrumental variable shows the suggestive evidence that the relationship between the prevalence of SOEs and intergenerational income persistence might be causal. Further analysis reveals that the prevalence of SOEs may hamper intergenerational mobility through (1) stifling competition from the private sector and (2) facilitating occupational inheritance within SOEs. Our research implies that reforming SOEs shall promote social mobility.

Suggested Citation

  • Haichao Fan & Zheng Fang & Bihong Huang & Mohan Zhou, 2022. "Prevalence of SOEs and intergenerational income persistence: Evidence from China," The World Economy, Wiley Blackwell, vol. 45(1), pages 276-291, January.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:1:p:276-291
    DOI: 10.1111/twec.13100
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