Globalization raises intergenerational inequality transmission in chinese villages

Abstract

Using China’s accession to World Trade Organization (WTO) in 2001, an epoch in the globalization process in recent decades, as a quasi-experiment, this paper studies the impact of globalization on intergenerational transmission of inequality in Chinese villages. Based on nationally representative rural household survey data, this study documents that the trade shocks brought about by China’s WTO accession has amplified economic inequality across generations in Chinese villages. The WTO accession enhanced international trade between China and the rest of the world by reducing trade barriers. The booming of the export-oriented manufacturing located in coastal and urban areas led to unprecedented rural-to-urban migration in human history. We find that migration leads to large income benefit. We also find that sons from wealthy and better-educated families in rural areas are more likely to grab the job opportunities brought about by the WTO accession and are more likely to migrate, compared with sons from less-wealthy and less-educated families. Policies are called for to address the concern that inequality would be persisting across generations along with globalization.