Social Sciences in China (Chinese Edition)

No.9, 2020

Financial Transfer Payments and the Intergenerational Mobility of Human Capital

(Abstract)

Fan Ziying

The main goal of financial transfer payments is the equalization of basic public services. This is especially true of the equalization of educational opportunities, which helps to enhance the intergenerational mobility of human capital. Using a simple theoretical model, we discuss the role of vertical transfer payments within the framework of regional competition. Our findings show that transfer payments can effectively promote the intergenerational mobility of human capital. Matching the 2010 census micro-data with county-level financial transfer payment data and taking into account differences across the two dimensions of birth year cohort and region, we examine whether transfer payments improve the intergenerational mobility of human capital. Our results verify the above theoretical conclusion and clarify the role of educational transfer payments within general transfer payments and special transfer payments. For this reason, if we are to improve equity in human capital acquisition, we need to improve the transfer payment system. In particular, we need to raise the proportion of transfer payments dedicated to education.