Inequality of opportunity in China: Evidence from pseudo panel data

Abstract

Abstract We construct a pseudo panel sample from the China General Social Survey to study the inequality of opportunity in China. The pseudo panel enables us to control for cohort-specific heterogeneities when estimating the Mincer equation, and the results show that individual circumstances play a prominent role in determining income advantage. Counterfactual analysis further reveals the importance of cohort-level circumstances: individual circumstances account for less than 10% of the observed income inequality, whereas equalizing both the individual circumstances and the cohort fixed effects reduces income inequality by 30%. Among the individual circumstances we examine, gender and paternal characteristics contribute more to income inequality than does hukou of birth. Subsample analysis shows that China s western provinces exhibit the highest inequality of opportunity and that the inequality of opportunity among younger cohorts is smaller than that among older cohorts.