How does Education Affect Income Inequality?

I worked as an independent researcher to investigate the causality between education and income equality in macro background in this paper.

In the therotical part, I developed an OLG model at the household level, incorporating the choice of continuing high school education. By introducing the probability of attending college after completing high school, it captured the relationship between family education decisions and income, thereby unravelling mechanisms by which education perpetuates social immobility.

And then I constructed a simultaneous equation model and employed the 3SLS method for estimation against the backdrop of income growth, concluding that education exacerbated income inequality through various channels.

This paper is attached here. (In Chinese)

Abstract:

(Original version in Chinese)

传统上人们认为教育是社会流动的关键渠道，这一结论在当代中国能否成立引发了笔者的思考。本文通过构建博弈框架、世代交叠框架，分析我国现行教育体制下，义务教育、高中教育对于收入差距以及更宏观的经济增长间的影响。本文发现高收入家庭的子女更可能在少年期接受更多的教育，积累更多的人力资本，从而享有更高的收入水平。为了检验这一命题，文章设置了分布滞后模型、联立方程模型的计量框架，并用3SLS方法进行估计，确认了这一结论，同时也指出收入差距对于教育程度的滞后影响，并给出了可能的解释。本文结果提示：政府应合理管控课外培训等提供额外教育的厂商，同时进一步扩大教育领域的投资，并依靠进一步的经济发展克服收入不平等。

(Translated version in English)

Traditionally, people believe that education is a key channel for social mobility. I am curious about whether this conclusion is valid in today’s China or not. This article analyzes the impact of compulsory education and high school education on income gaps and broader economic growth under china’s current education system by constructing a game framework and an OLG model, demonstrating that children from high-income families are more likely to receive more education in adolescence, accumulate more human capital, and thus have higher income levels. In order to test this proposition, I set up the econometric framework of distributed lag model and simultaneous equation model, and uses the 3SLS method for estimation, which confirms this conclusion. It also points out the long term impact of income gap on educational attainment, and gives a possible explanation of. The conclusions of this article suggest that the government should reasonably control firms that provide additional education such as extracurricular training, while further expanding investment in the education field and alleviating income inequality through economic development.