The effect of intergenerational mobility on family education investment: evidence from China

Abstract The discussion of inequality has been an enduring topic in sociology and economics. With the intensification of inequality, an increasing amount of research has begun to focus on the impact of inequality on various aspects of the economy and society. However, research on how inequality affects families’ education investment behavior currently remains relatively scarce. This study contributes to filling this gap by presenting one of the first analyses of the effect of intergenerational mobility-based opportunity inequality on family education investment. Specifically, based on a Chinese population sample survey conducted in 2015 and the China Family Panel Studies survey conducted in 2018, this paper measures the intergenerational mobility of regions using an index of intergenerational educational rank correlation, and it uses extracurricular tutoring expenses to measure families’ investment in their children’s education. The benchmark regression results show that intergenerational mobility significantly negatively impacts family education investment, with the average family education investment decreasing by 25.75 percent for every 0.1-unit increase in intergenerational mobility. This negative effect remains significant after robustness tests, such as replacing the explanatory variables and dependent variables, considering the influence of important omitted variables, evaluating the impact of unobservable factors, and introducing an instrumental variable for two-stage least squares regression analysis. In addition, this negative impact is more prevalent among families with high socioeconomic status, while it is not significant in families with low socioeconomic status. The reason is that families with low socioeconomic status face greater credit constraints and intergenerational mobility incentives. Furthermore, an examination of the mechanisms involved reveals that although the improvement in intergenerational mobility may increase people’s confidence in investing, it ultimately reduces family education investment by lowering excessive anxiety and the extent of status-seeking behavior among families. According to the analysis, promoting equality of opportunity could mitigate China’s negative educational competition and facilitate the realization of the “Double Reduction” policy.