Assortative mating, intergenerational mobility and couple pattern-oriented individual income tax reform

LIU Yi1 LI Zhihui1 GENG Zhixiang2

(1.School of Economics of Peking University)
(2.Economics and Management School of Wuhan University)

【Abstract】The study about the impact of assortative mating on intergenerational income mobility provides a theoretical tool for individual income taxation reform. Using 2010–2014 CFPS, the paper builds up the assortative mating model, and analyzes the influence of assortative mating on intergenerational income mobility. It finds that China’s intergenerational income elasticity is estimated as 0.42, and IIE for daughter samples is 0.45 higher than 0.40 for sons, which means a low intergenerational mobility in China. Parents’ family income plays a significantly positive role in the individual income of children-in-law, and the sons-in-law’s income elasticity with respect to parents’ family income is about 0.36, higher than 0.25 of daughter-in-law, presenting the importance of assortative mating, especially for daughters, in the mechanism of intergenerational persistence. Furthermore, the study estimates significantly positive correlation between parents’ household income and children-in-law’s education, implicitly presenting assortative mating in education may promote international persistence. The paper suggests, because of family income inequality, the new reform of individual income taxation is required to consider the family differentiation, and employs the family comprehensive income taxation for the reduction of family income gap and social inequality. Additionally, the residency principle for interregional tax share ought to be adopted for matching residents’ tax responsibility and public service, increasing public education investment from local government, and decreasing human capital investment gap among children, so as to and reduce the distance of family income capacity.

【Keywords】 assortative mating; intergenerational mobility; individual income tax reform; couple pattern;

【DOI】

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    Footnote

    [1]. ① Marriage is a critical channel through which the social status, the economic level, and the cultural background are redistributed among households. Assortative mating is the marital connection between two economic subjects with the same or similar family backgrounds. The degree of assortative mating can directly reflect the solidification of social strata and the intergenerational impact (Oppenheumer, 1988; Zhou, 2016; Christian and Juessen, 2013). Studies find that there is an increasing correlation between the salaries of husbands and wives in the United States, with the decile correlation coefficient growing from 0.16 in 1970 to 0.30 in 2000. [^Back]

    [2]. ② According to a report on Chines people’s love and marital status in 2014 conducted by Baihe.com, in terms of the expectation on partner selection, 49.7% of women will choose a man for marriage because of his desirable economic condition, and 88.8% of women hold that men should secure a stable economic income before they get married. The findings indicate economic condition is a prerequisite for marriages. According to the marriage results, the economic conditions and social ranks of the two families before the marriage are 69% and 79.7% similar, respectively, and the families with extremely distinct economic and social status take up only 2% (Ma et al., 2013). [^Back]

    [3]. ③ Li and Zhu (2015) analyzed the mode of the intergenerational mobility and the path of evolution in China since the 1960s and commented on the degree of intergenerational mobility. Wang and Yuan (2015) examined the trend of and reasons for China’s intergenerational mobility in different age groups. Zhou and Zhang (2015) explored the intergenerational mobility in Chinese urban and rural households from the occupation perspective. Chen and Yuan (2012) studied the mechanism of the intergenerational transfer of human capital, social capital, and wealth capital. [^Back]

    [4]. ④ The impact of gender difference on the measurement of the intergenerational mobility can be seen in two aspects. First, there is gender discrimination in the labor market. Women’s salary level is much lower than men’s, and women’s salaries are only 76% to 89% of men’s in urban areas (Li et al., 2014). Gender discrimination will affect the accuracy of the measurement of the correlation between the daughters’ incomes and the parental incomes. On the other hand, female labor supply is more elastic than the male labor supply (Zhang and Zhou, 2009), and women’s participation in the labor market is readily affected by their commitment to the housework (Liu et al., 2016). Women’s income levels before and after marriage also change, which will influence the assessment of women’s permanent incomes. [^Back]

    [5]. ⑤ Solon (2002) analyzes the international differences in the intergenerational income mobility and points out the differences in the features of the samples and the capacities of the intergenerational transfer in different countries, which leads to the significant distinctions in the intergenerational mobility. Bratberg et al. (2016) compare the intergenerational mobility in Germany, Norway, Sweden, and the United States and find the intergenerational mobility in European countries is high, while the intergenerational elasticity of the United States (about 0.432) is much lower. The differences might be closely related to the size of the country, the selection of the regions, and the income distribution. [^Back]

    [6]. ⑥ According to relevant data provided by the National Bureau of Statistics of China, the total average income per capita in urban areas in China reached CNY 23,979.2 in 2011, and the salary income per capita was CNY 15,411.9, taking up 64.27%. The individual business income and property income were also important sources of income. In rural areas, the net average income per capita was CNY 6877.3, and the net salary income was only CNY 2963.4, accounting for only 42.47%. The net household business income was in fact higher than the net salary income. Therefore, it is in line with the situations in China to adopt the salary income only to reflect the household income level. [^Back]

    [7]. ⑦ According to the estimation results of Chadwick and Solon (2002), the coefficient of the income elasticity between the parents and the sons-in-law in the United States was 0.408 in 1992. With the positive income of the spouses taken into consideration, the coefficient was adjusted to 0.387. However, the two figures were still lower than the coefficient of the income elasticity between the parents and the daughters-in-law, 0.541 (0.508 after adjustment). Hirvoene (2008) estimated that the income elasticity between the parents and the sons-in-law in Sweden was 0.25 (0.24 after adjustment) in Sweden, but the figure was also lower than the income elasticity of 0.258 between the parents and the daughters-in-law (0.257 after adjustment). [^Back]

    [8]. ⑧ Data from the National Bureau of Statistics of China show the proportion of the urban residents’ salary income in China keep declining from 71.17% in 2000 to 64.3% in 2012, which indicates the diversification of the income sources. Yang and Sun (2011) found that the difference in the non-salary income contributed to 52.96% of the total income difference in urban areas, while the difference in the salary income contributed to only 47.04%. It proves that the non-salary income gap is the major source of the income gap in China. Gan (2013), based on the data of China Household Finance Survey, found that the Gini coefficient of the household income in China in 2010 was 0.61, much higher than the degree of the individual income inequality, signifying that adjusting the household income gap was more evident. [^Back]

    [9]. ⑨ Chinese scholars have conducted comprehensive studies on the income regulation effect of the individual income tax (Xu et al., 2013; Yue et al., 2012), concluding that the income distribution function of the individual income tax is limited. [^Back]

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This Article

ISSN:1002-5502

CN: 11-1235/F

Vol , No. 09, Pages 60-72

September 2017

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Article Outline

Abstract

  • 1 Introduction
  • 2 Theoretical framework and empirical model
  • 3 Data and statistical description
  • 4 Empirical analysis and results
  • 5 Conclusion and policy suggestion
  • Footnote

    References