POVERTY & EQUITY NOTES SEPTEMBER 2019 · NUMBER 16 Economic mobility across generations in the developing East Asia and Pacific region Ambar Narayan and Judy Yang 1 The pace and success of economic growth in the developing East Asia and Pacific region (EAP) has been described as nothing short of a miracle. Education and its complementarities are often linked and credited significantly for the region’s positive story on economic growth. During the early stages of the region’s development, education kept pace and complemented labor needs; widespread basic literacy and numeracy met demands in manufacturing and assembling. This led to rapid improvements in educational mobility across generations in absolute terms, where mobility is understood as the rise in education levels from one generation to the next. On the other hand, progress has been slower and uneven in relative mobility, which is more closely linked to inequality in education and income and refers to the extent to which an individual’s position in society is influenced by that of his or her parents. Economic mobility across generations, or generations are important for sustaining a social intergenerational mobility, can be interpreted in two contract that addresses the aspirations of society. ways: absolute upward mobility or the extent to which living standards are better among individuals now than among their parents; and relative Progress in absolute mobility in education in mobility, which is the extent to which the relative EAP has been rapid position of individuals on a socioeconomic scale is independent of the relative position of their parents. Rising absolute mobility in education is an important Absolute mobility centers on a universal human aspiration among parents for a better life for their ingredient in EAP’s success story. The EAP region is a strong performer in absolute education mobility, children. Relative mobility reflects the aspiration of measured by the share of adults in a generation who every generation to live in a society where all individuals, regardless of their parental connections exceed the education level of their parents. After decades of rapid improvements, average absolute or social status, have the opportunity to climb to a rung on the economic ladder that is higher than the mobility among the latest generation of adults (those born in the 1980s) in EAP is on par with the average rung on which they happened to be born. Higher for high-income economies and significantly higher relative mobility across generations is associated with than the average for developing economies. lower inequality of opportunity, which is the extent to which people’s life achievements are affected by For the 1980s generation, average absolute mobility circumstances they are born into, such as parental in EAP is higher than the averages for the low income education and income, race, gender, or birthplace. and lower middle-income economies and on par with Thus, both absolute and relative mobility across 1For full citations and to read more about Economic mobility across generations in the developing East Asia and Pacific region, please refer to Part 2A in the October 2018’s edition of the East Asia and Pacific Economic Update. The analysis is based on the World Bank report entitled “Fair Progress? Economic Mobility across Generations around the World.” the averages for the upper-middle income and high- income groups. The rate of improvement in the EAP EAP lags high-income countries in relative average from the 1940s generation to the 1980s mobility, and upward mobility from the generation has outpaced that of the averages for all bottom is declining income groups. In each of the four EAP countries where mobility estimates are available for all cohorts from the 1940 to the 1980s (China, Mongolia, Timor- Intergenerational persistence is a measure of how Leste and Indonesia), absolute mobility has increased strong an individual’s outcomes is related to that of noticeably. The average share of individuals in EAP their parents. A high persistence is synonymous with countries surpassing their parents in educational low relative mobility. The EAP average for relative attainment has increased from 47 percent among mobility in education has improved over time and is those born in the 1950s to 56 percent among those higher than the average for the developing world and born in the 1980s. all other developing regions for the 1980s generation. However, it is still significantly lower than Following the pattern seen globally, countries in EAP the high-income average. The share of children who with higher levels of poverty (Lao PDR and Papua have moved out of the bottom half (in terms of New Guinea) and remote Pacific Island countries parental education) to the top quartile, which have the lowest rates of absolute mobility, and measures “upward mobility from the bottom to the wealthy countries such as Thailand and Malaysia have top”, also tends to be lower in the average EAP the highest. In these countries, more than 80 percent country than in the average high-income economy. of those born in the 1980s have more education than In EAP, average relative mobility has improved their parents, which are some of the highest rates of between the 1950s and the 1980s generations, with absolute mobility in education in the world. There is some periods of reversal in the middle. But progress considerable variation in absolute mobility among in the EAP average has not outpaced improvements EAP countries within income-groups. Among lower- in the high-income average. Thus, while relative middle income countries, absolute mobility varies mobility in EAP for the 1980s generation is higher from 41 percent in the Philippines to nearly 70 than the averages for the low-income and middle- percent in Indonesia and Vietnam, with Cambodia income groups, it remains well behind the high- and Mongolia showing rates in the low 60s. Among income average. The EAP experience is consistent upper-middle income countries, absolute mobility with a global pattern: average relative mobility is the rate in China (56 percent) is well below that of highest for the high-income group of countries and Malaysia and Thailand. progressively weaker for lower income groups; and the gaps between income groups have widened over As one would expect, absolute mobility in education time. closely tracks the trends in educational attainment. Average years of education in EAP have risen more When relative mobility is measured by persistence, rapidly than the average for any income group, and no distinction can be made between upward and is currently on par with the average for the upper downward mobility. An intuitive measure that does middle-income group. Years of education also make such a distinction is the share of individuals correlate predictably with a country’s level of who make it to the top quartile of education in their development. Average years of schooling among 15- generation, among those born into the bottom half 64 years olds are the highest in Malaysia and lowest by their parent’s education (with respect to the in Cambodia and Myanmar. parental generation). Measured thus, upward mobility from the bottom to the top is lower than ideal (which would be 25 percent if child mobility was unrelated to parent’s education) almost everywhere. But the lowest rates are found mostly in the September 2019 · Number 16 2 developing world – forty-six of the bottom 50 emerging. Absolute mobility among girls is much economies by this measure developing economies. lower than among boys in Lao PDR; and Cambodia Over time, bottom-to-top mobility has been has the largest gap in EAP in average years of dropping or stagnating on average for all income schooling between women and men aged 15-64. groups, primarily driven by declining rates among Moreover, reverse gender gaps among subsequent sons. In EAP, mobility from the bottom to the top has generations can also become a cause for concern in fallen over time, with almost all the decline occurring EAP, if the trends seen for the high-income and between the 1940s and 1960s. upper-middle income groups are any guide. Early indications of such a reversal have already appeared Across countries, one sees a mixed story of progress in some countries. In Thailand, Mongolia and some in relative mobility in education in EAP. Among the of the island nations, absolute mobility among girls six large countries with estimates for multiple of the 1980s generation is significantly higher than cohorts, three countries – Lao PDR, Timor-Leste, and among boys. Indonesia – experienced a decline in persistence (increase in relative mobility) between the 1950s and the 1980s cohorts. But in China, Mongolia and Intergenerational persistence has been Vietnam, persistence is higher, or relative mobility is increasing in China lower for the 1980s cohort than for the 1950s cohort. Persistence at the bottom is also becoming more The declining trend in relative mobility in education pronounced as measured by large declines in from the 1950s generation to the 1980s generation mobility from the bottom half to the top quartile in in China runs counter to the trends for EAP, lower- five out of the 6 countries. The share does not exceed middle income, and upper-middle income countries. 20 percent in any country in EAP for the 1980s As a result, relative mobility in China among the generation. 1980s generation is below the averages for EAP and upper middle-income countries. In contrast, China’s Gender gaps in mobility – absolute as well as trajectory of absolute educational mobility is relative – have almost disappeared in EAP consistent with a rapid expansion in education and follows the trajectory of the averages for EAP and upper-middle income countries: a rapid increase, Gender gaps in EAP have been closing steadily, followed by a leveling off from the 1960s generation. following the global trend of narrowing gender gaps The trends in relative educational mobility in China in absolute mobility and upward mobility from the are consistent with those reported in other research. bottom to the top. The gender gaps in these two Fan and others (2015) find that relative mobility in measures were substantial in favor of the boys for the income and education was lower for individuals born 1940s generation in EAP, but have all but after 1970 than for those born between 1949 and disappeared for the 1980s generation, mirroring the 1970. Magnani and Zhu (2015) find that parent- rapid increases in girls’ education during the children educational correlations increased from the intervening time. The gender gap in persistence has cohort born in 1966-1970 to the cohort born in 1976- disappeared as well in EAP, like what is seen for the 1980. Both Chen and others (2015) and Golley and upper-middle income group. This has not happened Kong (2013) find that intergenerational persistence for the developing world as a whole, since has increased since around 1950. persistence among girls has increased relative to boys in the low and lower-middle income groups. Several hypotheses have been suggested to explain why persistence has worsened even as educational Some gender gaps in education remain in individual attainment has increased to go with rapid economic countries and a new form of disparity might be expansion. One possible explanation is an increasing September 2019 · Number 16 3 rural-urban divide. Huang and others (2016) argue to services that can in turn limit educational mobility that the expansion of compulsory education suffered of rural-registered households in urban areas. from poor targeting and insufficient enforcement, Individuals who receive an urban registered status which may have hit rural households harder than late in life, still have lower education than other urban urban households. Certain policies that restricted residents (Liu, 2005). geographical labor mobility in Mao’s era may also have created direct barriers for the rural population Using the CFPS, comparing residents by hukou type, (Gong and others, 2012). Knight et al (2013) show average persistence of those with urban hukous is that in the 1980s, progression to higher levels of found to be much lower than that of those with rural education slowed, especially in rural areas. Fiscal hukous and all urban residents. Persistence increased decentralization in the 1980s also meant that rural more among the all-urban group than among the all- areas struggled more to generate financing for rural and the urban hukou groups between the 1960s education. They also postulate that higher and the 1970s generations, which could reflect large persistence for the combined national sample, rural to urban migration during this period. compared to separate rural and urban estimates, reflect differences and barriers between urban and rural sectors. Policies for fairer progress – global evidence Some also speculate that the benefits of the Evidence from research and patterns in the global data expansion of higher education have primarily gone provide a few insights on the broad directions for to the elite (see, for example, Huang and others policies to improve mobility in education. First, the state 2016). Rising returns to higher education and rising can play a proactive role in closing opportunity gaps costs of higher education may have played a role as between children born with different individual well. Both Magnani and Zhu (2015) and Fan and circumstances, in maternal health, early childhood others (2015) find returns to education to have development, and access to education of high quality. increased in the past decades, which can increase the Second, the state can be pro-active about equalizing incentives of better-off parents to invest even more opportunities across space, since spatial inequalities in children’s education. Fan and others (2015) also appear to be a barrier to economic mobility in most find evidence for a sharp rise in the costs of tertiary countries. Third, fiscal policy is a key tool for realizing education, which makes it harder for children from these equity objectives and for managing risks faced by low-income backgrounds to access higher education. households, while minimizing the tradeoffs with Declining relative mobility could also reflect efficiency. widening inequality between China’s rural and urban registered households. In 2012, the National Bureau ABOUT THE AUTHORS of Statistics reported inconsistencies between the Ambar Narayan is a Lead Economist in the World location of residency and registration (or hukou) Bank’s Poverty and Equity Global Practice. existed for 279 million individuals, which is largely anarayan@worldbank.org because of people with a rural agricultural registration living in urban areas. Rural-registered Judy Yang is an Economist in the World Bank’s children in urban areas and born in the 1990s are less Poverty and Equity Global Practice. likely to be enrolled in school than urban-registered jyang4@worldbank.org children, suggesting that registration affects access This note series is intended to summarize good practices and key policy findings on Poverty-related topics. The views expressed in the notes are those of the authors and do not necessarily reflect those of the World Bank, its board or its member countries. Copies of these notes series are available on www.worldbank.org/poverty September 2019 · Number 16 4