Intergenerational Economic Mobility in New Zealand

Abstract

This paper, which briefly summarises recent research by Treasury, tentatively quantifies intergenerational economic mobility in New Zealand using income data from a cohort study of people born in Dunedin in 1972-1973, and occupation data from the 1996 Election Study's post-election survey. The intergenerational income elasticity point estimate for all Dunedin Study participants was .26 when using fathers' incomes to explain children's incomes, with the 95% confidence interval stretching from .14 to .39. Even with controls for the gender of participants and their father's age, the proportion of variance explained was only 13%. For the nation-wide Election Study the point estimate for the effect of father's socio-economic status (SES) on the SES of respondents was .20 for respondents aged 25 years and older, with a 95% confidence interval of .16 to .24. However, father's SES and the age and gender of respondents explained only 5% of the variance in respondents’ SES. We have to be cautious when interpreting our results because both datasets contain proportionately fewer Maori and Pacific peoples than the New Zealand population, the Election Study data is now almost 13 years old, and the Dunedin Study participants have not reached their peak earning years. Our intergenerational income mobility estimate for New Zealand has wide confidence intervals, while confidence intervals for estimates of intergenerational occupational mobility are not available for most countries. As a result, we reached few firm conclusions about New Zealand's relative position compared to other countries.