Journal of Integrative Agriculture 2021, 20(4): 1080–1091

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ScienceDirect

RESEARCH ARTICLE

Status and path of intergenerational transmission of poverty in

rural China: A human capital investment perspective

BAI Yun-li1, 2, ZHANG Lin-xiu2, 1, SUN Ming-xing1, 2, XU Xiang-bo1, 2

1
Key Laboratory of Ecosystem Network Observation and Modeling, Institute of Geographic Sciences and Natural Resources
Research, Chinese Academy of Sciences, Beijing 100101, P.R.China
2
UN Environment Programme-International Ecosystem Management Partnership, Beijing 100101, P.R.China

Abstract
This paper focused on the intergenerational transmission of poverty in rural China by estimating the intergenerational
transmission of earnings and stated its mechanism from the perspective of human capital investment before children
participated in the labor market. The data used in this study were longitude data collected in 2 000 households of 100
villages among 25 counties across five provinces in 2005, 2008, 2012, 2016, and 2019. Qualitative and quantitative
methods were adopted. We found a significant intergenerational transmission of earnings in rural China, especially for the
pairs of father–children and parents–children. The intergenerational earnings’ elasticities were much less than those in
urban areas, which indicated better social mobility in rural areas than that in urban China. The children with parents who
could earn much were more likely to be invested before they participated in the labor market, gain a high education and
have more skills. Three cases further showed that the mechanism of human capital investment in children breaking the
intergenerational transmission of poverty and promoting social mobility.

Keywords: poverty, intergenerational transmission, human capital, rural China

Bank 2018), and most of them lived in developing countries.

1. Introduction
Poverty is the first global challenge under the sustainable
development goals set by the United Nations (2015).
According to the most recent estimates, 10% of the world’s
population lived on less than US$1.90 a day in 2015 (World
Received 20 February, 2020 Accepted 4 August, 2020
Correspondence BAI Yun-li, Tel: +86-10-64889834, E-mail: ylbai.
ccap@igsnrr.ac.cn
© 2021 CAAS. Published by Elsevier B.V. This is an open
access article under the CC BY-NC-ND license (http://
creativecommons.org/licenses/by-nc-nd/4.0/).
doi: 10.1016/S2095-3119(20)63373-1
Worldwide, the poverty rate in rural areas is 17.2% - more
than three times higher than that in urban areas (United
Nations 2020).
The biggest challenge for poverty alleviation is to
break the intergenerational transmission of poverty (ITP),
especially in developing countries. The ability to move up
the income ladder is a matter of fairness and has major
implications for poverty reduction (Breen and Jonsson 2005;
Kambourov and Manovskii 2009; Warzywoda-Kruszyńska
2013; Chetty et al. 2014; Narayan 2018). Most of the
literature has focused on the ITP in the developed countries,
such as the United States, Canada, the United Kingdom,
and Spain (Rodgers 1995; Dearden et al. 1997; Blanden
and Gibbons 2006; Cardak et al. 2013; Duarte et al. 2018).
However, the studies on the ITP in developing countries
 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091
were rare and only recently appeared (Kabeer and Mahmud
2009; Cooper 2010; Gong et al. 2012; Deng et al. 2013; Fan
2016; Behrman et al. 2017; Wu et al. 2019). Notably, both
absolute and relative social mobility is lower in low- and
middle-income countries compared with that in high-income
countries, according to the report from the Global Database
on Intergenerational Mobility (Narayan et al. 2018).
Most of the literature on ITP has focused on the
intergenerational transmission of family income or individual
earnings (Atkinson et al. 1983; Solon 1992, 1999; Chadwick
and Solon 2002; Pascual 2009; Cardak et al. 2013; Fan
2016; Qin et al. 2016). However, a few studies have used
the possibility of being poor (Rodgers 1995; Quisumbing
2008). The previous studies measured the intergenerational
elasticity in income or earnings by specifying a linear
regression equation between log income or earnings
of children and log income or earnings of parents. The
significance and magnitude of intergenerational elasticity
in income or earnings depended on the definition of the
outcome variable and the different estimation methods in
the literature.
There are multiple definitions of family income and
individual earnings. Fan (2016) defined family income as
the total annual average income of the father and mother
in at least three preceding years of the survey wave. Qin
et al. (2016) took the average values of fathers’ annual
income in all sample waves as a proxy measure of fathers’
permanent income and yearly income as a measurement of
son’s income. The definition of individual earnings was more
consistent than that of family income. It referred to wages,
bonuses, and other subsidies provided by the employer.
However, the measurement of earnings varied among these
studies. Log of hourly earnings, log of weekly earnings,
log of monthly earnings, and annual earnings were usually
used to measure the son’s and father’s earnings (Atkinson
et al. 1983; Hertz 2001; Cardak et al. 2013). Some studies
have used the log of average earnings over several years
of children and parents to alleviate potential biases induced
by income fluctuations and lifecycle effects (Osterbacka
2001; Mazumder 2005; Lee and Solon 2006; Nicoletti and
Ermisch 2008; Gong et al. 2012). For reviews, see Solon
(2002) and Black and Devereux (2011).
Ordinary least squares (OLS) and instrumental variable
(IV) were usually used to estimate the intergenerational
transmission of income or earnings in the literature. OLS
was the earliest and most widely used method (Solon
1992; Hertz 2001; Osterberg 2001; Deng et al. 2013). For
example, Deng et al. (2013) used a one-year and average of
three years of children’s incomes as independent variables
and corresponding income of parents as the key regressor
to estimate the intergenerational income elasticity with the
samples of urban households in China in 1999 and 2002
1081
by adopting the OLS estimation method. The IV estimation
method has been adopted in some related studies. The
common IV used in the literature was predicted earnings
in parents’ occupations (Leigh 2007). The two-sample
instrumental variables approach was another common
method that has been used to estimate ITP (Nicoletti and
Ermisch 2008; Gong et al. 2012; Lefranc et al. 2014).
When estimating the intergenerational transmission of
income or earnings, some characteristics affecting children’s
income or earnings are included in the model. Gender has
been proved to be an important trait influencing off-farm
wage (Wang et al. 2016, 2019). The education, skill, and
physical health status were often included in the model to
control the impact of human capital on the off-farm wage
(Kamga et al. 2013; Heckman et al. 2014; Wang et al. 2016,
2019). The experience usually measured by age was also
controlled in these studies. Previous studies found wage
premium among different cities (Yankow 2006; Zhou et al.
2018).
Researchers have found that human capital, including
education, health, and nutrition, was widely recognized as a
key mechanism for escaping from ITP (Glewwe et al. 1999;
Harper et al. 2003; Quisumbing 2008; Bird and Higggins
2011; Room 2011; Gong et al. 2012; Qin et al. 2016; de
Vuijst et al. 2017; Duarte et al. 2018). Education, a critical
indicator of human capital, has been widely mentioned for its
contribution to social mobility (Ruiz 2016). Poor health was
the central issue faced by poor groups (Mackintosh 2001;
Freedman 2005). Bad health could be both an outcome
and a cause of poverty. Poverty created the situation in
which bad health was occurred and perpetuated, such
as low productivity and income, inadequate diets, unsafe
working and living environments, and reduction in long-term
investment (Grant 2005). But bad health also led to poverty
through reducing income of adults when with increasing
expenditures on health care and through the long-term
irreversible effects on functional capabilities, including
ability to maximize returns on the acquisition of education
(Mayer-Foulkes 2003).
The key precondition for breaking the ITP is to clarify the
mechanism of ITP. The empirical studies on this topic have
been rare because of the limitation of long panel data. To our
knowledge, only several studies have investigated this topic
in China. Gong et al. (2012) estimated the intergenerational
income elasticity for urban China by using the Urban
Household Education and Employment Survey 2004 and the
Urban Household Income and Expenditure Survey 1986–
2004. Deng et al. (2013) estimated the intergenerational
income elasticities by using samples of urban China for
the years 1999 and 2002. Fan (2016) investigated the
intergenerational income association and its transmission
channels amid China’s economic transition period by using
1082 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091
urban data from the Chinese Household Income Projects
in 1995 and 2002. Qin et al. (2016) studied the impact
of human capital transmission across generations on the
intergenerational income mobility in urban and rural areas of
China using 1989–2009 China Health and Nutrition Survey
data. Wu et al. (2019) analyzed the regional differentiation
characteristics of ITP and explored its impact mechanisms
based on a sustainable livelihood framework. Among these
studies, only Qin et al. (2016) used the sample including
rural households.
The ITP in China, the biggest developing and most
populous country in the world, has been paid an increasing
attention from scholars and policymakers. The Chinese
central government is determined to eradicate absolute
poverty by 2020, in which preventing ITP was one of the
most important challenges (State Council 2015). The
new terms “Fu-er-dai” (children of rich families), “Guan-er-
dai” (children of government officials), and “Nong-er-dai”
(children of peasants) reflect the persistent influence of
parents’ socioeconomic positions on their children. Some
scholars have estimated intergenerational transmission
elasticity from the perspective of income, education,
occupation, and self-employment business (Fan 2016; Qin
et al. 2016; Dong et al. 2019; Wang W D et al. 2020; Zhuo
et al. 2020).
Despite the increasing attention on ITP in China, rigorous
study of this topic has been scarce in rural areas. Rural
areas hold 40.4% of the permanent residents in China and
are the main targeted areas for poverty reduction because
of the long-term existence of the urban–rural dual structure.
China is a critical case study for understanding the nature of
social mobility during the transition from a socialist command
economy to a more market-oriented economy (Emran and
Sun 2011). Therefore, focusing on breaking the ITP in
rural China is important to narrow the socioeconomic gap
between urban and rural areas in China and contributes to
other developing countries.
This study attempts to estimate the ITP in rural China and
identify its mechanism from the perspective of human capital
investment in the offspring before they participated the labor
market by adopting qualitative and quantitative methods. It
contributes to the literature from three perspectives. First,
identifying the mechanism based on the human capital
investment before the offspring participate in the labor
market using unique dataset. This study applies systematic
logic of human capital investment in schooling affecting the
capacity of earning wages after participating in the labor
market. Second, it provides additional empirical evidence on
human capital influencing intergenerational mobility in rural
areas of developing countries. Third, it considers skills as a
critical type of human capital when finding the mechanism
of ITP, which is vital for the income of rural residents but
has been neglected in the literature.
The remainder of the paper is organized as follows:
Section 2 introduces data and methods of this study.
Section 3 presents the results and discussion. Section
4 shows the mechanism of ITP. The conclusion is in
Section 5.
2. Data and methods
2.1. Sampling and data collection
This paper used the panel data, namely, the China Rural
Development Survey, collected by the authors. A multi-
round survey was administered to 2 000 households and
village leaders of 100 villages in 25 counties across five
provinces in 2005, 2008, 2012, 2016, and 2019. The
dataset was used widely to research the evolution of
rural labor market, the intergenerational transmission of
education and occupation, and the governance in rural
China (Wong et al. 2017; Zhang et al. 2018; Dong et al.
2019, 2020; Liu et al. 2019; Wang H J et al. 2020; Wang
W D et al. 2020; Zhuo et al. 2020). In the first round of
the survey in 2005, each sample province was randomly
selected from China’s major agroecological zones. Finally,
Jiangsu, Sichuan, Shaanxi, Jilin, and Hebei provinces
were selected.
Five sample counties were then selected from each
province in a two-step procedure. First, the enumeration
team listed all the counties in each province in descending
order of per capita gross value of industrial output, which is
a good predictor of the standard of living and development
potential and often more reliable than the net per capita
income (Huang and Rozelle 1996). Second, five counties
per province were randomly selected from the resulting list.
From each selected county, the team selected sample
townships and villages. Two townships were selected from
each county, comprising one from each of the two groups
per county: a “more well-off” group and a “poorer” group.
Following the same procedure, two villages per township
were selected. Finally, the survey teams randomly selected
20 households from each village: eight participated
in the questionnaire survey and 12 participated in the
small group interview. We also conducted four rounds
of follow-up surveys in 2008, 2012, 2016, and 2019. All
of the households in following surveys participated in the
questionnaire survey.
The survey team gathered detailed information on
individual demographics and household characteristics
in each wave of the survey. Individual demographic
characteristics included gender, birth year, years of
schooling or the present grade, the number of siblings, and
birth order. The human capital of the individual comprised
 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091
the skill status, such as the type of skills, the start and final
year of training for that skill, and physical health except for
formal schooling. The team also documented each laborer’s
employment status in the household, including whether they
had off-farm work; the months in a year, days in a month, and
hours in a day they worked off-farm; and the location and
occupation of the off-farm employment. More importantly,
we gathered information on the investment in an academic
year in schooling for the children in each wave of survey,
including tuition fees, incidental fees, book fees, course
fees, and other fees related to schooling.1
This dataset helped us construct the earning pairs of
parents and their children, which we used to analyze the
ITP, since the off-farm employment has been a major source
of income for households in rural China (NBSC 2019; Luo
et al. 2020). We investigated the mechanism of ITP from
the perspective of human capital investment, according to
the information on years of schooling, skill training, physical
health, and the investment in schooling.
We mainly used the data collected in 2019 to conduct
quantitative analysis in this study. The sample in this
study was limited to the rural laborers engaged in off-farm
employment and his/her children who had performed off-
farm work in 2018 and had finished their education. Finally,
we obtained a sample of 322 pairs of fathers and their
children, 160 pairs of mothers and their children, and 102
pairs of parents and their children. Among these children,
34, 60, and 16 of them were in school when we surveyed
in 2016, 2008, and 2005, respectively. The data supported
our analysis of the relationship between human capital
investment and ITP. We also conducted case studies with
16 of the pairs to discuss the mechanism systematically
because they had just started primary school in 2005 and
have participated in off-farm employment since 2018. In
other words, we used the data from 2005 to 2019 to do
mechanism analysis and case study with the information
on investment in education of the children before their
participation in labor market.
2.2. Identification strategy
Most economic analyses on the elasticity of intergenerational
transmission of earnings or income have used the coefficient
in the following intergenerational regression model.
Additionally, using Holmlund et al. (2011) and Pronzato
(2012), who have studied the intergenerational transmission
of education, as references, we employed three empirical
specifications to examine the intergenerational transmission
1
Amount of investment in formal schooling was not collected in 2012.
1083
of earnings from the father, mother, and parental average to
the child. For each child i in household h, we have:
LogEarningih=α+βLogEarningdadih+γFih+εih (1)
LogEarningih=α+βLogEarningmomih+γFih+εih (2)
LogEarningih=α+βLogEarningavgih+γFih+εih (3)
For convenience, we defined Earning as the hourly
earnings of an individual child. Earningdad, Earningmom, and
Earningavg represented the hourly earnings of the father,
mother, and the average of the parents, respectively. Hourly
earnings has often been used to reflect the ability to earn in
the labor market. In this study, we calculated hourly earnings
by the total annual wages divided by the annual number of
hours of off-farm employment.
F was a vector of other factors that may influence the
child’s hourly wage. These factors are years of schooling,
gender (1=male), age (years), number of vocational
qualification certificates, experience in the current industry
(months), job location (1=within the county), self-reported
physical health (1=health), and a set of provincial dummies
to capture regional factors that might affect the child’s wage.
The description of the variables is presented in Table 1. ε is
the error term. Compared with models (1) and (2), model
(3) had the advantage that it controlled assortative mating,
avoided multicollinearity, and produced a more precisely
estimated coefficient.
3. Results and discussion
3.1. Descriptive statistics of children and their
parent’s wage
Fig. 1 showed the hourly earnings of parents and their
children. According to our data, the average hourly earnings
of the children was 19.2 CNY in 2018. The father’s average
hourly earnings was 16.8 CNY in the same year. The
average earnings of the mother was 13.0 CNY. The average
earnings of father was approximately 1.3 times as much
as the wage of mother in rural families, which was much
smaller than those in the literature (Li et al. 2013; Wang
et al. 2019). The finding indicated the healthy development
of the Chinese rural labor market.
In Fig.  1, the hourly earnings of children increased
with the rise in the father’s hourly earnings, which implied
an obviously positive correlation between the earnings
of fathers and their children (Fig. 1-A). The correlation
coefficient between hourly earnings of children and father’s
hourly earnings was 0.118 (P<0.01, R2=0.02). However, the
relationship between mothers’ and their children’s hourly
1084 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091

Table 1 Description of the variables

Variable N Mean Std. Dev. Min. Max.
Log(Hourly earnings of children) 322 2.769 0.655 0.397 4.483
Log(Hourly earnings of father) 335 2.589 0.726 0.329 4.563
Log(Hourly earnings of mother) 164 2.262 0.629 0.351 4.364
Log(Average hourly earnings of parents) 105 2.496 0.521 0.397 3.794
Years of schooling of children 335 11.170 3.333 0 19
Gender of children (1=male) 335 0.803 0.398 0 1
Age of children (years) 335 27.875 6.101 20 48
Number of certificates of skill 335 0.752 0.605 0 3
Experience in current industry (months) 335 52.991 50.276 0 300
Job location (1=within the county) 335 0.391 0.489 0 1
Self-reported physical health (1=healthy) 335 0.985 0.121 0 1

Hourly earnings of children Fitted values

A B
Hourly earnings of children (CNY)

Hourly earnings of children (CNY)

120 120

100 100

80 80

60 60

40 40

20 20

0 0
0 20 40 60 80 100 0 20 40 60 80 100
Hourly earnings of father (CNY) Hourly earnings of mother (CNY)

C
120
Hourly earnings of children (CNY)

100

80

60

40

20

0
0 20 40 60 80 100
Average hourly earnings of parents (CNY)

Fig. 1 Relationship of hourly earnings between parents and their children.

earnings had a weak positive correlation compared with average hourly earnings of children and average hourly
that of the father and children (Fig. 1-B). The correlation earnings of parents was 0.027 and it was not significant
coefficient between hourly earnings of children and mother’s even at 10% level (R2=0.003).
hourly earnings was 0.018 and it was not significant even at
10% level (R2=0.002). This finding indicated that the hourly 3.2. OLS model of intergenerational transmission
earnings of the mother might have a slight influence on the of earnings
hourly earnings of her children. The correlation between the
average hourly earnings of parents and their children was According to the OLS estimation, there was a positive
also positive (Fig. 1-C). The correlation coefficient between relationship between parents’ and their children’s hourly
 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091 1085

earnings (Table  2). We found that the impact of the
father–children transmission effect was 0.226 (P<0.01),
which meant that each 1% increase in the father’s hourly
earnings would on average lead to an approximately 0.226%
increase in their children’s hourly earnings (row 1, column 1).
When we controlled individual characteristics, this effect
reduced to 0.213 (P<0.01) (row 1, column 2). When we
further controlled regional factors, we found the magnitude
of the transmission effect declined to 0.202 (P<0.01) (row 1,
column 3). The mother’s hourly earnings had almost
no effect on their children’s hourly earnings, which was
consistent with that in descriptive analysis.
However, the impact of parents’ average hourly earnings
on children’s hourly earnings was positive and much
stronger than that of the father’s or mother’s alone. This
result showed that each 1% increase of parents’ hourly
earnings on average added approximately 0.287% of
children’s hourly earnings (P<0.05) (row 3, column 7). When
we further controlled other covariates, the transmission
effect remained significant, and the magnitude increased
to 0.373 (P<0.01) (row 3, column 9).
Children’s hourly earnings were also correlated with other
characteristics. Years of schooling of the children had a
significant positive effect on their hourly wage (P<0.01) (row
4, columns 3, 6, and 9). This finding was consistent with
those in the literature, but the magnitudes of the coefficient
were larger in this study (Li et al. 2005; Zhang et al. 2008;
Wang et al. 2019). It further indicated that human capital was
playing an increasingly important role in wage, which proved
the healthy and equitable development of the Chinese labor
market. Males had much higher wages only in model (1)
(P<0.01) (row 6, column 3). Although we considered the
effects on the children’s hourly earnings on the basis of the
background of the average earnings of a parent or parents,
there was no significant difference in the earnings between
the male and female children (row 6, column 9). Age also
had a significant and positive effect on the hourly earnings
(P<0.01) (row 6, columns 3, 6, and 9). If the age increased

Table 2 Intergenerational transmission of earnings in rural China

Log(Hourly earnings of children)
Variable
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Log(Hourly earnings of father) 0.226*** 0.213*** 0.202***
(0.049) (0.046) (0.048)
Log(Hourly earnings of mother) 0.024 0.050 0.026
(0.101) (0.095) (0.095)
Log(Average hourly earnings of parents) 0.287** 0.365***0.373***
(0.119) (0.111) (0.118)
Years of schooling (years) 0.036*** 0.036*** 0.058*** 0.061*** 0.045** 0.043**
(0.011) (0.011) (0.019) (0.020) (0.019) (0.019)
Gender (1=male) 0.213** 0.219** 0.051 0.067 –0.018 –0.049
(0.088) (0.088) (0.133) (0.134) (0.129) (0.134)
Age (years) 0.023*** 0.022*** 0.040*** 0.041*** 0.050***0.052***
(0.006) (0.007) (0.011) (0.011) (0.011) (0.011)
Number of vocational qualification certificates 0.138** 0.138** 0.191** 0.179* 0.038 0.063
(0.058) (0.059) (0.096) (0.098) (0.097) (0.099)
Experience in the current industry (months) 0.001 0.001 0.000 0.000 0.000 0.000
(0.001) (0.001) (0.001) (0.001) (0.001) (0.001)
Job location (1=within the county) –0.165** –0.167** –0.439*** –0.417*** –0.175 –0.189
(0.070) (0.071) (0.125) (0.125) (0.121) (0.123)
Self-reported physical healthy (1=health) 0.565** 0.548** 1.060** 1.012** 0.909** 0.966**
(0.268) (0.271) (0.428) (0.440) (0.392) (0.406)
Sichuan 0.006 0.100 0.231
(0.103) (0.167) (0.153)
Shaanxi –0.075 –0.072 0.185
(0.099) (0.169) (0.160)
Jilin –0.084 0.170 0.148
(0.122) (0.208) (0.208)
Hebei –0.100 –0.248 0.012
(0.107) (0.182) (0.195)
Constant 2.185*** 0.378 0.489 2.713*** –0.196 –0.152 2.048*** –0.874 –1.087*
(0.132) (0.362) (0.385) (0.238) (0.580) (0.623) (0.303) (0.587) (0.648)
Observations 322 322 322 160 160 160 102 102 102
R-squared 0.062 0.204 0.208 0.000 0.239 0.264 0.055 0.349 0.371
***
Robust standard errors in parentheses. , P<0.01; **, P<0.05; *, P<0.1.
1086 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091
1 year, hourly earnings rose approximately 0.022–0.052%.
The number of vocational qualification certificates and job
location had positive and negative effects on the hourly
earnings, only in models (1) and (2), respectively (rows 7
and 9, columns 3 and 6). Self-reported physical health had
positive and significant effects on hourly earnings, implying
the vital role of human capital - on education and physical
health - in the earnings.
3.3. Discussion on the results of OLS regression
Our study found that the estimated effects of the father’s
hourly earnings - consistent with in the literature -
demonstrated that higher-earning fathers increased their
children’s hourly earnings. The result was lower than
other studies that used the Chinese urban sample (Gong
et al. 2012; Deng et al. 2013). The implication was that
intergenerational mobility was higher for individuals born in
rural parts of China, which was consistent with the logical
deduction of Gong et al. (2012).
However, in the literature that has used an urban sample,
a significant intergenerational transmission of income
between mother and children was observed. For example,
Deng et al. (2013) found that income persistence for the
children–mother pairs was 0.340 for 1995 and 0.448 for
2002. Gong et al. (2012) found that the intergenerational
income elasticity of mother–son and mother–daughter was
0.369 and 0.338, respectively. The hourly earnings among
rural females were more homogeneous than that of males
or that of urban females, which led to a slight effect on their
offspring’s hourly earnings. The small sample size may
also have an effect.
Although the results of our study showed that average
hourly earnings of both parents played a stronger role than
the father’s or the mother’s hourly earnings alone, the
coefficient of the average hourly earnings of both parents
was not comparable to the coefficients of the father’s or
the mother’s hourly earnings individually. The average
hourly earnings of both parents when increased by 1%
was equivalent to both the father’s and the mother’s hourly
earnings increasing by 1%. Thus, both parents’ average
hourly earnings played a stronger role than either the
father’s or the mother’s hourly earnings. Compared with
the relationship of father’s or mother’s and their children’s
hourly earnings, the correlation of average hourly earnings
of parents and their children controlled assortative mating,
avoids multicollinearity, and produces more precisely
estimated relationships.
Potential endogeneity is a limitation of the OLS model.
In our case, this limitation affected our study when parents
and their children are linked by similar genetics and family
culture. This connection between the generations may bias
the results in a manner that tends to overstate the effect of
the parents’ earnings on their children. In other words, it is
statistically significant that children following a similar path
to their parents, but the OLS model may describe this only
as being a feature of intergenerational transmission rather
than a combination of similar genetics and family culture.
The family fixed effect (FFE) model is an effective method to
address this type of potential endogeneity (Dong et al. 2019).
Due to the limited sample, we cannot use the FFE model to
estimate the transmission effect of parents’ earnings on their
children’s earnings while eliminating these other contributing
factors that affect both parents and their children.
4. Mechanism of ITP
4.1. Parent’s earnings and the human capital of their
children
We attempted to find the mechanism of ITP by identifying
the relationship between parent’s earnings and the children’s
human capital because human capital have gradually
become the main determinant of the children’s earnings.
According to the literature, aspects of human capital were,
for example, formal education in school, skills training, and
physical and mental health. Due to the limitation of the
data, we were only able to identify the relationship between
parents’ earnings and formal education in school, skills
training, and physical health. The human capital of children
was related to the whole-family characteristics. Thus, we
mainly analyzed the relationship between the average hourly
earnings of parents and the human capital of their children.
In Table  3, average hourly earnings of parents were
positively correlated with the years of formal schooling of
their children. If the average hourly earnings of parent’s
increased by 1%, the years of formal schooling of their
children increased by 1.367 years (row 1, column 1).
When we controlled other variables, such as gender,
siblings, and birth order, that affected education, the
result remained robust (row 1, columns 2 and 3). We also
observed a significant positive correlation between parents’
average hourly earnings and the duration of skills training
of their children while controlling the covariates (row 1,
columns 5 and 6). However, no significant relationship
was observed between the average hourly earnings of
parents and the children’s self-reported physical health.
The results indicated that high hourly earnings can be
intergenerationally transmitted by improving the children’s
human capital, especially education and skills training.
In other words, improving the human capital of children
facilitated breaking the of ITP.
 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091 1087

Table 3 Effect of parents’ earnings on the human capital of their children

Years of schooling of children Duration of skills training Self-reported physical health
Variable (years) (months) (1=health)
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Log(Average hourly 1.367** 1.319** 1.324** 1.044 2.351* 2.909** 0.004 0.002 –0.009
earnings of parents) (0.580) (0.628) (0.647) (1.188) (1.357) (1.202) (0.016) (0.014) (0.017)
Gender (1=male) –1.833*** –1.840*** –2.889 –2.874 –0.028 –0.022
(0.657) (0.700) (2.503) (2.247) (0.021) (0.018)
Age –0.019 –0.017 0.092 0.117 0.001 –0.000
(0.050) (0.053) (0.097) (0.093) (0.001) (0.001)
Number of siblings –0.700 –0.717 2.539* 2.133 –0.009 0.000
(0.539) (0.545) (1.362) (1.489) (0.014) (0.011)
Birth order 0.590 0.588 0.717 0.610 –0.018 –0.017
(0.817) (0.853) (2.116) (2.085) (0.038) (0.038)
Sichuan 0.118 –3.295* 0.004
(0.829) (1.965) (0.005)
Shaanxi 0.142 1.616 –0.068
(0.861) (2.735) (0.049)
Jilin –0.069 –1.494 0.005
(1.455) (2.349) (0.007)
Hebei –0.018 –0.660 0.009
(1.055) (2.295) (0.014)
Constant 8.416*** 10.178*** 10.082*** 2.484 –3.890 –4.979 0.970*** 1.009*** 1.065***
(1.462) (2.802) (2.994) (2.913) (5.240) (5.284) (0.045) (0.026) (0.060)
Observations 105 105 105 105 105 105 105 105 105
R-squared 0.048 0.123 0.124 0.004 0.063 0.101 0.000 0.015 0.064
***
Robust standard errors in parentheses. , P<0.01; **, P<0.05; *, P<0.1.

Notably, the regressions did not demonstrate that
the current average hourly earnings of a parent was a
determinant of their children’s human capital. However,
according to the literature, the current earnings were
significantly affected by previous earnings (Durlauf 1996;
Heckman and Vytlacil 1998; Geweke and Keane 2000;
Islam 2013). Thus, the children in families with current
high-earning parents will logically have high human capital.
4.2. Parents’ earnings and their investment in the
human capital of their children
We further described the relationship between the earnings
of parents and the schooling investment in their children
before the children participated in the labor market to find
their logical relationship. To achieve this objective, we
used the sample for which we have documented parents’
expenditure on schooling in each survey. Schooling
investment includes fees for tuition, incidentals, books,
and courses and others, such as tutorial fees for courses.
The results showed that parents’ hourly earnings had
a positive significant correlation with the expenditure on
schooling in each survey year; however, the sample was
very small in each survey (Table  4). Specifically, the
schooling investment in 2015 increased by 1.9% if the hourly
earnings of parents increased by 1 CNY (P<0.1) (row 1,
column 1). If the hourly earnings of parents increased by
1 CNY, the schooling investment in 2007 and 2004 increased
by 2.4 and 6.3%, respectively (P<0.1, P<0.05) (row 1,
columns 2 and 3).
4.3. Case studies on ITP
We exploited three cases to further analyze three types
of ITP and their mechanisms. These three cases were
drawn from those who had just started primary school in
2005 and participated in off-farm employment since 2018,
which supported us to clearly state the mechanism of
intergenerational transmission of earnings from the human
capital perspective. The three cases described the role of
investment in human capital in escaping from ITP, being
caught in the ITP, and persisting intergenerational earnings.
All of these cases demonstrated the importance of
investment in children’s education and skill training
before their participating in labor market. If the children
were invested in education or skill training more before
participating in labor market by their parents, they were
more likely to earn higher than their parents and had better
social welfare, such as pension, medical insurance, and
promotion opportunities. If the children were invested less
in education or skill training in their school period, they
usually faced more challenges in obtaining a steady job
in the formal sector and earning higher wages than their
parents. With the economic development and increasingly
1088 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091

Table 4 Effect of parents’ earnings on the schooling investment in children

Log(Schooling investment in Log(Schooling investment in Log(Schooling investment in
Variable 2015) 2007) 2004)
(1) (2) (3)
Hourly earnings of parents 0.019* 0.024* 0.063**
(0.011) (0.013) (0.028)
Grade in the survey year 0.126*** 0.269*** 0.058
(0.035) (0.040) (0.071)
Sichuan –0.095 –0.829** 0.396
(0.305) (0.317) (0.448)
Shaanxi 0.017 –0.711** –0.214
(0.242) (0.317) (0.549)
Jilin 0.497*** –0.699
(0.172) (0.551)
Hebei –0.561* 0.264 –0.135
(0.318) (0.485) (0.285)
Constant 7.300*** 5.468*** 5.268***
(0.500) (0.437) (0.901)
Observations 34 60 16
R-squared 0.410 0.483 0.650
***
Robust standard errors in parentheses. , P<0.01; **, P<0.05; *, P<0.1.

competitive labor market, only the offspring was invested
more than their parents, they might escape from or persist in
the intergenerational transmission of earnings. The detailed
case stories are shown in Appendix A.
In Section 4, we combed for the paths of ITP by identifying
the relationship of parents’ earnings and their children’s
final human capital before participating labor market
and estimating the impact of parents’ earnings on their
investment in children’s schooling when the children being
in school. This analysis went through the whole chain from
children’s schooling to their labor participation. Using the
quantitative and qualitative methods, we proved the cycle
of parents’ income–human investment–offspring’s income
using a uniform sample. The results implied that it was very
difficult to escape from ITP for the children of poor families.
The visionary parents and enough money are the necessary
rather than sufficient conditions. Although there is a formal
financial aid system of education for poor families in rural
China, the funding intensity and parents’ cognition of utilizing
the funding to support children’s schooling, especially before
entering college, are both the important factors affecting the
final human capital outcomes.
5. Conclusion
This paper used five waves of panel data with 2 000
households spanning more than 15 years to analyze
the intergenerational transmission of earnings. Using
quantitative and qualitative methods, we found an obvious
intergenerational transmission of earnings in rural China,
especially for the intergenerational transmission between
the earnings of father and children and average earnings
of parents and their children.
Along with the intergenerational transmission of earnings,
human capital played a vital role in increasing the earnings
of children. The regressions demonstrated that parents’
earnings were positively and significantly correlated with the
years of formal schooling and the duration of skills training of
their children. The results indicated that the high earnings
would be intergenerationally transmitted by improving the
children’s human capital, which helped break the ITP.
Using the small sample with the information on the
schooling investment in the surveys, we performed
quantitative analysis and found that parents’ earnings had
a positive significant correlation with the expenditure on
schooling of the children. This finding implied that parents
with high earnings were more likely to invest their children’s
human capital, which further improved the earnings of
their children. We explored three cases in our sample
by combining school history and current employment
performance. The cases showed that investing in children’s
human capital could accelerate their capacity to obtain a
high income and promotions.
Compared with that in urban areas, the intergenerational
transmission of earnings in rural China was much lower,
which indicated that the income mobility in rural areas was
higher. It implied that it was a breakthrough in focusing on
intergenerational transmission of earnings in solving relative
poverty in China after 2020. It also showed that increasing
rural household income by investing education would gain
greater social benefits in rural areas since it promoted the
upward mobility easier than that in urban China.
In South Asia, Africa and developing countries in other
parts of the world, parental background - especially
 BAI Yun-li et al. Journal of Integrative Agriculture 2021, 20(4): 1080–1091
income- matters the most for the prospects of the offspring.
The findings of this study on China may help understand the
ITP of other developing countries. Even though the next
generation’s economic status will depend on more factors
than education, such as the efficiency and fairness of factor
markets, education is likely to continue to play a key role
in economic mobility across generations. Some measures
implemented in China, like compulsory education law and
the financial aid system of education for poor families,
may be extended to other developing countries and may
effectively help them break the ITP.
This was the first study to identify the ITP in rural China
from the perspective of analyzing the intergenerational
transmission of off-farm earnings and found its mechanism
by using a mixed method based on long-term tracking
data. However, we did not identify the causal effect by
using another method, such as FFE or IV, because of the
limited sample. Additionally, the multiple effects of human
capital investment on the children and their heterogeneous,
such as on employment quality, family welfare, vocational
promotion, and so forth, require further exploration. If the
data are available, further research will produce valuable
information for literature.
Acknowledgements
We acknowledge the financial supported by the National
Natural Science Foundation of China (71903185 and
71661147001), the Strategic Priority Research Program of
Chinese Academy of Sciences (XDA20010303), and the
National Social Science Fund of China (18ZDA005). We
thank the Ph D students and research assistants of UNEP-
International Ecosystem Management Partnership (UNEP-
IEMP) for collecting data. We appreciate the time and effort
of numerous local officials, village leaders, and farmers in
our sample areas for their assistance with our survey.
Declaration of competing interest
The authors declare that they have no conflict of interest.
Appendix associated with this paper is available on http://
www.ChinaAgriSci.com/V2/En/appendix.htm
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