8 Appendix

The Appendix contains material on the methodology and data covered only in passing or omitted entirely from the main text. Additional analysis and tables showing the full results from the regression analysis are also included. The unique information in Section 8.1.4 on the incomes and educational qualifications of Dunedin Study participants who were living in different countries at age 32 is of particular significance. Many of the other sections are more technical and are less likely to be of interest to most readers.

Section 8.1 discusses the Dunedin Multidisciplinary Health and Development Study dataset. The opening paragraphs discuss the rationale for using the Dunedin Study to investigate intergenerational income mobility. Section 8.1.1 discusses the extent to which Dunedin is representative of New Zealand, while Section 8.1.2 is a theoretical section about what inferences we can make from population study data. Section 8.1.3 outlines the collection of data on the incomes of participants' parents and on the participants themselves. Section 8.1.4 compares the characteristics of study members who were living in New Zealand at age 32 to the characteristics of those study members who were living in Australia, Britain and in other countries. This section contains new and significant information on the median incomes and educational qualifications of participants who were living outside New Zealand. Section 8.1.5 contains scatter graphs of the incomes of Dunedin Study members and their parents, together with best-fit lines from regression. Section 8.1.6 is a technical section on the dataset.

Section 8.2 describes the 1996 New Zealand Election Study data. Section 8.2.1 outlines the sampling of the electoral roll and the extent to which the sample mirrors New Zealand's population. Data on Māori is discussed in Section 8.2.2. Section 8.2.3 describes the calculation of the SES scores. Section 8.2.4 shows scatter graphs from the Election Study regressions, while Section 8.2.5 is a technical section on the dataset.

Section 8.3 contains detailed tables comparing rates of intergenerational mobility in New Zealand to rates of intergenerational mobility for other developed countries.

8.1  New Zealand income datasets and the Dunedin Study

Currently no comprehensive nationwide New Zealand datasets on the incomes of children's parents and of the incomes of these children when they are adults are available for research purposes. Surveys such as the Household Economic Survey (HES) record the incomes of children and their parents only when they are living at the same address and, at most, interview people for only a few years. Since relatively few adult New Zealanders live with their parents, using this data for our research would mean using a skewed sample of New Zealanders. Only limited use of individual-level Inland Revenue data for research purposes has been possible in New Zealand (Dixon, 2002; Hyslop, 2000). The longest-running national study of income in New Zealand is the Survey of Family, Income and Employment (SoFIE), which began in 2002 and will run for eight years (Statistics New Zealand, 2010). However, even when all the SoFIE data is available, most of the children living with their parents in 2002 will not be in their peak earning years. We therefore tested intergenerational income mobility using data from the longitudinal Dunedin Study.

As noted in the main paper, the Dunedin Study is a cohort study of 1,037 people born between 1 April 1972 and 31 March 1973 in Dunedin who were still living there at age three. Data on the physical and mental health and wellbeing of participants has been collected at regular intervals. There were a small number of children not included, either because of parental refusal or because children could not be found in time. Those not followed up tended to come from the extremes of the group in terms of SES, and were about 9% of the potential sample. However, those enrolled did not differ in terms of perinatal characteristics, mode of delivery at birth, birth weight or the prevalence of neonatal problems from those who have not taken part in the study (Silva, 1990, p. 80). The Dunedin Study participation rate has remained very high. About 94% of those who were in the study at age three participated in the age 32 assessments that took place between November 2003 and mid-2005.[40] This implies an extremely low attrition rate for a longitudinal study. The study pays participants' travel costs, even if they have emigrated. Section 8.1.1 now discusses how representative Dunedin is of New Zealand, and how intergenerational mobility in other countries has been studied using regional datasets.

8.1.1  Extrapolating the Dunedin Study results

The Dunedin Study covers people born in Dunedin during 1972-73, which is narrower than the population of interest (all people born in New Zealand at about that time). Nevertheless, in the 1970s, Dunedin had the fourth biggest population of any New Zealand metropolitan area, included children from a full range of backgrounds and had a similar socio-economic character to the rest of New Zealand (Ferguson, Poulton, et al., 2003, p. 3; Silva and McCann, 1996, pp. 10-11). Welfare payments, entitlements to public education and health services, and the minimum wage are the same throughout New Zealand. Health outcomes for Dunedin Study participants at ages 21 and 32 were usually not statistically different from those of other New Zealanders of the same age (Poulton, Hancox, et al., 2006, p. 9). Similarly, when participants were at intermediate school their test results were not statistically different (at a .05 level) from children of the same age who had been born in other parts of New Zealand but were living in Dunedin, and were also usually similar to those of other New Zealand children (Silva, 1984, p. 7). At age 32, the participants had similar benefit receipt histories to those of all New Zealanders born in 1972-73 (Welch and Wilson, 2009b, p. 3). However, the Dunedin Study is under-representative of Māori and Pacific peoples compared to New Zealand’s entire population, with 7.5% and 1.5% of its participants respectively identifying with these groups at age 26 (Poulton, et al., 2006, pp. 1, 9).[41] While the Dunedin Study participants were all born in Dunedin, by the time they were 21 a third were living elsewhere (Silva and McCann, 1996, pp. 14-15). By the time they were 32 only 38% of participants were living in Dunedin.

Because the Dunedin Study participants are not perfectly representative of people born in New Zealand in the early 1970s (Silva, 1990, p. 81), the Dunedin Study results cannot be extrapolated to all New Zealanders born during that period. Nevertheless, the Dunedin Study results are useful for understanding intergenerational income mobility in New Zealand. This is because Dunedin is a major city with many similar policy settings and characteristics to the rest of New Zealand. The Dunedin Study researchers consider its study members to be “broadly representative” of New Zealand children born in the early 1970s (Poulton, et al., 2006, p. 9).

Estimates of intergenerational mobility in other countries using the best available regional datasets have been similar to estimates using equivalent samples from large national datasets. For example, the first estimate of intergenerational income mobility for Britain was based on men born in York. Although York was unrepresentative of Britain in some respects, the point estimate of 0.358 for men from York is within the 95% confidence interval for a subsequent point estimate of 0.306 calculated using a national cohort study of British men (Atkinson, 1980, p. 210; Atkinson, et al., 1983, pp. 41, 178; Jäntti, et al., 2006, pp. 13, 15). The most widely-used regional dataset for studying intergenerational mobility in the United States has been a sample of Wisconsin high school students. Intergenerational income elasticity results using the Wisconsin dataset are also similar to estimates calculated using one or two observations of father’s income from a national dataset of men of broadly similar ages (Becker and Tomes, 1986, pp. S24-S27; Solon, 1992, pp. 394, 401). Estimates of intergenerational income mobility in Norway and Sweden using small regional datasets have also produced similar estimates to later studies using large national datasets (Corak, 2006, pp. 61-63; Gustafsson, 1994, pp. 82-85; Soltow, 1965, pp. 107-110). These results support our judgement that using the Dunedin Study data is a valid way of investigating intergenerational income mobility in New Zealand.

We are aware of two studies that have directly tested whether the rate of intergenerational income mobility varies within a country. In the United States, Mayer and Lopoo found statistically significant differences in intergenerational income mobility between some groups of states. These differences appeared to be most strongly associated with the level of expenditure on compulsory education (Mayer and Lopoo, 2008, pp. 149, 151, 154-155). A study of Finland also found small regional differences in intergenerational income mobility. However, the boundaries of the “regions” used reflected when local municipalities adopted educational reforms, and imperfectly reflected geographic regions (Pekkarinen, et al., 2006, pp. 5, 10). In terms of government expenditure, New Zealand is the most centralised of OECD countries (OECD, 2009, pp. 56-57). Because local and regional government does not fund or have any influence over the running of schools in New Zealand, the inter-regional variations found in these studies may not apply to New Zealand.

A few other national studies of intergenerational mobility have also included dummy variables for the region in the United States, France or Italy in which people were born or lived when they were growing up (Hertz, 2006, p. 12; Lefranc, 2004, pp. 12,17; Piraino, 2007, p. 11). However, these dummy variables have controlled for large regional differences in the incomes of parents, rather than for the effect of region on intergenerational income mobility in the sense in which we have measured this concept.[42]