China and the United States: Different economic models but similarly low levels of socioeconomic mobility

Abstract

The United States and China are the world's largest economies. Together they are responsible for about one-third of the world's economic output. This paper aims to examine whether the two economic giants are also lands of opportunity where resources are allocated in a way that minimizes unrealized human potential. Our analysis shows that despite stark differences in their levels of development, the US and China report remarkably similar levels of socioeconomic mobility; a level that is considered low by international standards. The US's level of socioeconomic mobility has historically been low, with little to no progress over the last three to four decades. Before it embarked on its transition from planned to market economy, socioeconomic mobility was relatively high in China. However, as it underwent a period of rapid economic growth, China's socioeconomic mobility declined significantly. The paper concludes that the world's two major economic powers have converged to a low level of socioeconomic mobility where talent from disadvantaged backgrounds is excluded from opportunities, plausibly implying unrealized human potential and misallocation of resources on a large scale.

China and the United States

“…In this chapter, we will focus on indicators that measure the degree to which one's success is contingent on the success of one's parents. Estimates for an alternative concept of intergenerational mobility, measuring the extent of progress that one generation as a whole has made in comparison to the previous generation, are presented in Van der Weide and Narayan (2019).…”

“…For an inclusive review of the literature on the determinants of socioeconomic mobility and the public interventions that have been considered across the world to improve mobility, we refer the interested reader to Section 7 of Van der Weide and Narayan (2019). While most of the evidence on the drivers of mobility reviewed in what follows comes from research on the US and other developed economies, it is relevant for a middle-income country such as China, particularly as the Chinese economy rapidly approaches high-income status.…”