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Intergenerational mobility research quantifies the relationship between the circumstances of parents and the circumstances of their children as adults. This paper tentatively quantifies intergenerational economic mobility in New Zealand using the best available datasets. These datasets are: longitudinal income data from the Dunedin Study of the population of people born in Dunedin in 1972-73; and occupation data from the 1996 Election Study’s post-election nationwide survey. The occupation data determines the Socio-Economic Status (SES) of respondents and their parents. The results show that only a small proportion of variance in income or SES was explained by the economic situation of people’s parents, indicating that other explanatory variables are more important.
The Dunedin Study results suggest that rates of intergenerational income mobility for men and women from Dunedin are probably within a similar range to rates of intergenerational income mobility in most other developed countries. Our results provide weak evidence that New Zealand has higher intergenerational occupational mobility than Britain, and stronger evidence that New Zealand men have higher intergenerational occupational mobility than men in Germany. Unfortunately, insufficient data is available to make intergenerational occupational mobility comparisons with other countries.
We have to be cautious when interpreting our results because both datasets we used contain proportionately fewer Māori and Pacific peoples than New Zealand’s population. The Dunedin Study was founded in a single city, and while the study has a very high participation rate its participants may not be fully representative of New Zealand’s population. In addition, participants have not reached their peak earning years, and this may have affected the results. The nationwide Election Study is under-representative of people from groups less likely to be on the electoral roll and the data is now over 14 years old.
Thanks to Professor Richie Poulton (University of Otago) and Professor Jack Vowles (University of Exeter) for providing data and for their comments on the paper. At the Treasury, Tony Burton initiated the project. Claire Douglas, Gerald Minnee, Katy Henderson, Norman Gemmell, Paul Rodway, Minoo Meimand, David Law, Grant Scobie and Oliver Valins reviewed the paper and made useful comments. Dean Hyslop (Victoria University of Wellington) provided an insightful external review on an early draft. Professor Markus Jantti (University of Stockholm), Professor John Ermisch (Essex) and Professor Andrew Leigh (ANU) provided advice on methodological details and on international comparisons. Anna D’Addio (OECD) and Professor Jacques Poot (Waikato) provided valuable encouragement and comments. In addition, Dr Philip Meguire (Canterbury), Dr Peter Leowen (UBC) and Dr Eric Belanger (McGill) provided useful suggestions about Section 8.1.2.
The views, opinions, findings and conclusions or recommendations expressed in this Working Paper are strictly those of the author. Theydo not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.
Table of Contents
- Executive Summary
- 1 Why researchers are interested in intergenerational mobility
- 2 Calculating and comparing intergenerational mobility
- 2.2 Comparing rates of intergenerational mobility
- 2.3 Explaining variations in intergenerational mobility
- 3 The New Zealand data
- 3.2 The New Zealand Election Study data
- 4 The Dunedin Study results
- 4.1 Including those living overseas
- 4.2 Mediation of parental income effects through education
- 4.3 Results excluding extreme outliers and after adding a quadratic
- 5 New Zealand Election Study results
- 5.1 Inter-group movement
- 5.2 Intergenerational mobility with variables for being Māori, for ethnicity and for region
- 6 Comparing our results with those for other countries
- 6.2 Comparing the Election Study occupation results with similar overseas studies
- 7 Conclusion
- 8 Appendix
- 8.1.2 Statistical inference from a population study
- 8.1.3 The Dunedin Study income data
- 8.1.4 Incomes of people in the Dunedin Study
- 8.1.5 Scatter graphs of the incomes of parents and of Dunedin Study participants
- 8.1.6 Dunedin Study cases available for analysis
- 8.2 New Zealand occupation datasets and the New Zealand Election Study data
- 8.2.3 Calculation and distribution of SES
- 8.2.4 Scatter graphs of the relationship between the SES of fathers and of Election Study respondents
- 8.2.5 Election Study cases available for analysis
- 8.3 Detailed tables of the data used in the cross-national comparisons of results
- 9 References