Luo Chuliang, Paul Frijters and Xin Meng, School of Economics Discussion Paper No. 470 October 2012, School of Economics, The University of Queensland. Australia.


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This paper looks at the relation between education and family income using a 2008-2009 survey of nearly 10,000 children in 15 cities and nine provinces throughout China. We use school test scores on mathematics and language, as well as parent-reported educational progress, out-of-pocket expenses, and self-reported quality of schooling. Across all measures, children from wealthier families do better, but the gap is much smaller for older children than younger children in rural areas and is almost entirely gone at the end of secondary school. In Chinese cities and in Western countries like the US the opposite is the case, with the gap between children from poor and rich households staying constant or even widening as the kids get older. Our explanation is that it takes a generation of universal education for ability, education, and parental income to become highly correlated, which will already have happened in Chinese cities and in Western countries, but is only just now happening in rural areas in China. Accordingly, the relation between family income and child ability increases over generations, reducing future education and income mobility.