Inequality in China: O Brother, Where Art Thou?

The Economist looks at research into the extent to which China’s considerable inequality of outcomes is due to inequality of opportunity. One method of investigation involves comparisons between siblings, but in China, this approach faces an unusual limitation.

Not every parental influence can be observed, distinguished and measured …. So in a recent working paper, the two authors look at an alternative indicator: namely, the correlation between one brother’s income and another’s. This fraternal comparison is a good “omnibus” measure of the weight of family and community influence, according to Mr Eriksson. Two children brought up by the same people, under the same roof, in the same neighbourhood, will share many of the same circumstances of birth and background. If these things matter greatly in a society, they will govern the life chances of both brothers, resulting in a tight correlation in their incomes. If, on the other hand, family background matters little, the fraternal correlation will be low.

In a 2000 paper co-authored by Mr Eriksson, he and his colleagues found that the correlation was much higher in the US (0.43) than in the Nordic countries (0.14 to 0.26). In China, the correlation is higher still: 0.57. To put that in context, the authors argue that knowing what a person’s brother earns gives you a a better guide to a Chinese person’s income than economists are normally able to obtain from knowing how many years of schooling and work experience a person has under his belt.

There is, however, one big obstacle to calculating brother correlations in China. Thanks to the one-child policy, few young, urban Chinese have siblings. The author’s estimate of 0.57, therefore, applies only to rural China. In China’s cities, inequality of opportunity takes a rather different form: the second-born are denied the opportunity to exist.

May 30, 2011 9:23 PM
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