Economic development and intergenerational earnings mobility: Evidence from Taiwan

Abstract

How economic development affects intergenerational earnings elasticity is not well-documented. In this paper, we estimate intergenerational earnings elasticities between fathers and sons in two periods. In the current period, 2005–2010, Taiwan is already a developed economy with slower economic growth. We apply the two-sample approach developed by Björklund and Jäntti (1997) and find that intergenerational earnings elasticity is around 0.4–0.5 in this period. In the earlier period, 1990–1994, Taiwan was still a developing economy with fast economic growth. We mimic the Björklund-Jäntti two-sample approach and use average earnings by occupation as a proxy for fathers’ earnings. To quantify potential bias, we apply the same method to the 2005–2010 data. Our proxy method yields similar estimates in both the early 1990s and late 2000s. These results suggest stable intergenerational transmission of economic status in Taiwan, despite its rapid economic development.