Unveiling the Neighborhood Effect on Intergenerational Mobility: Which Scale is More Relevant?

While conventional literature on intergenerational mobility emphasizes parental investment as the main driver of children’s human capital, recent studies highlight the role of neighborhood effects. This paper aims to characterize neighborhood human capital (the average educational levels within neighborhoods) to clarify its impact on intergenerational educational mobility. Using data from China’s 1% population survey, we uncover a positive and statistically significant correlation between neighborhood human capital and rank-based intergenerational mobility in education. Moreover, by exploiting the address code to identify varying scales of neighborhoods, from the narrowest communities to the broadest provinces, we construct a comprehensive understanding of neighborhood human capital. Specifically, we find that neighborhood human capital at the community level has the greatest impact on mobility, followed by the street, district, county, and province levels, respectively. Our results are robust to a series of concerns such as endogeneity issues and sample selection problems. Further investigations confirm that residential segregation may distort the relationship between neighborhood human capital and intergenerational mobility. Specifically, stratified neighborhoods are likely to persist and reinforce disparities in educational attainment and intergenerational mobility. While acknowledging its significance at narrower scales, this study suggests that policymakers focus more on neighborhood capital’s spillover effects at broader levels. Such a focus has the potential to promote greater equity in access to high-quality public education, alleviate the adverse effects of residential segregation, and improve intergenerational mobility.