Can digital factor participation create opportunities for “rags to riches”? Based on the perspective of intergenerational income mobility

Abstract

Intergenerational hierarchical solidification threatens the sustainable development of economies and societies in countries worldwide. In this paper, we match macro data on digital factor participation at the city level with micro data from the Chinese Family Panel Studies (CFPS) from 2010 to 2018 to explore whether digital factor participation can break hierarchical solidification and create opportunities for “rags to riches” on the basis of the perspective of intergenerational income mobility. We find that digital factor participation contributes to facilitating upwards income mobility between generations, alleviating intergenerational hierarchical solidification. Additionally, its marginal effects are most pronounced in the low-income groups, indicating that digital factor participation serves as a booster for “poor second generations” to leapfrog rather than an accelerator for wealth accumulation among the “wealthy second generations”. Furthermore, our research reveals that digital factor participation potentially facilitates intergenerational occupational vertical “shift” channels and promotes the horizontal migration of the labour force, which in turn weakens intergenerational transmission effects, promotes intergenerational income mobility, and breaks intergenerational hierarchical solidification. Our study highlights the importance of seizing the opportunities presented by digital factor participation, as such participation offers more equitable opportunities for the lower class, which is particularly concerning in the context of the intensifying global trend of social stratification.