From lion rock to locked gates: The decline of upward mobility in Hong Kong

Li Yang and Zhejin Zhao

No 26-034, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Using Hong Kong census data from 1976 to 2021, this paper provides the first comprehensive analysis of absolute intergenerational mobility (AIM) in a transitioning Asian economy. We introduce two innovations: decomposing AIM by factor income (labor component vs. capital component) and a Mincer-based counterfactual framework isolating education, birthplace, and other sociodemographic factors. AIM declined sharply from 85% for the 1976 cohort to 49% for the 2001 cohort, driven primarily by slower income growth rather than rising inequality, which is similar to France or Sweden, but lagging Western economies by one to two decades. Labor component mobility drove the entire decline (75% to 49%), while capital component mobility remained low and stable (17-20%). Education expansion temporarily boosted AIM by up to 18 percentage points for the 1991 cohort, coinciding with Hong Kong's post-1989 tertiary enrollment surge. Instrumental variable estimates using the 1978 compulsory education reform are consistent with the OLS-based estimates and support their validity. Our replicable framework offers insights for transitioning economies facing similar structural shifts.

Keywords: Absolute intergenerational mobility; education expansion; labor component vs capital component; Hong Kong (search for similar items in EconPapers)
JEL-codes: D31 J62 O15 O53 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:343112

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