Discussion Paper No.412
Intergenerational Mobility of Economics Statusacross Three Generations: The Case of Taiwan
Zhi-xiao Jia

Publish date (2019/08/23)

TOHOKU ECONOMICS RESEARCH GROUP
Discussion Paper

GRADUATE SCHOOL OF ECONOMICS AND

MANAGEMENT TOHOKU UNIVERSITY

27-1 KAWAUCHI, AOBA-KU, SENDAI,
980-8576 JAPANIntergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Intergenerational Mobility of Economic Status across Three
Generations: The Case of Taiwan*

Zhi-xiao Jia†
Graduate School of Economics and Management, Tohoku University, Sendai, Japan

Abstract
This paper analyzes the intergenerational mobility (IGM) of economic status across three
generations in Taiwan. Grandfather-father-son relation is considered, and grandfathers’
economic status is imputed based on their characteristics by applying Two-Sample TwoStage Least Square (TS2SLS) approach. This study finds that the intergenerational elasticity(IGE) between fathers and sons is 0.154, while that between grandfathers and fathers is0.349. Intergenerational elasticity between grandfathers and sons is 0.159, and roughly
62.83% to 66.60% of intergenerational elasticity between grandfathers and sons is
explained by both parents’ economic status, which implies that grandfathers’ economic
status is transmitted to sons’ generation mainly through the indirect pathway.

Key words: intergenerational elasticity, intergenerational mobility, multigenerational
mobility, Taiwan, Two-Sample Two-Stage Least Square
JEL Classification: D31, J62

I would like to thank my supervisor Midori Wakabayashi and my senior Aysenur Aydinbakar. I am also
grateful to Survey Research Data Archive (SRDA), Academia Sinica of Taiwan for providing the data. I also
thank all the participants at the symposium at Tohoku University, the Mini-Conference on Issues in theIntergenerational Mobility and Inequality at Keio University, and the 2019 Meetings of the Society of the
Economics of the Household (SEHO) at University of Lisbon for their helpful comments. All the remaining
errors are mine.
† Email address: jia.zhixiao.s1@dc.tohoku.ac.jp*

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

1. Introduction
Since Becker and Tomes (1979, 1986) proposed their well-known theoretical model ofintergenerational transmission of economic status and intergenerational investment in
human capital, the so-called intergenerational mobility (IGM) has been widely studied indifferent countries with different economic structures, social institutions and cultural
backgrounds by economists.1, 2 This study analyzes IGM of economic status in Taiwan.
Most of previous studies focus on IGM between two adjacent generations (e.g., parents
and children), and so does the only three published papers of IGM in Taiwan (Kan et al.,2015, Sun and Ueda, 2015, Chu and Lin, 2019). However, only considering two generations
is not enough for Taiwan. Certain demographical and cultural features make it importantto analyze IGM in Taiwan across three generations (i.e., grandparents, parents andchildren). First, extended families are quite prevalent in Taiwan (Freedman et al., 1978,
1982, Weinstein et al., 1990), and such extensive, or even multigenerational family structure
makes it easier for grandparents to transmit their endowments and traits to their
grandchildren, which indicates that the intergenerational persistence between grandparents
and grandchildren should not be ignored in Taiwan. Even in recent decade, there are stillroughly 40% of aged Taiwanese people (65 years and older) living together with their
grandchildren, as shown in Figure 1:[Place Figure 1 here]
Moreover, living standard of Taiwan increased significantly during past few decades, which
increased life expectancy of both sexes from 69.1 in 1970 to over 80 in early 2010s.3 Plus,
Taiwan faces rapid population aging and it has achieved aging society and aged society in
1993 and 2018, respectively.4, 5 These further make it important to analyze grandparents’role in the process of transmission of economic status, since aged people have become a

Throughout the entire paper, intergenerational mobility (IGM) refers to intergenerational mobility of
economic status, instead of educational or occupational mobility across generations.
2 Corak (2013) provides a detailed review of empirical studies of IGM in different countries.
3 Data source: Ministry of the Interior
4 Data source: Ministry of the Interior
5 For a more detailed description, one may refer to Mason and Lee (2004).
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1Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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substantial part of entire Taiwanese population.
Besides above demographical characteristics, cultural background also makes IGM in
Taiwan across three generations an interesting case to study. As influenced by ancient
Chinese culture (e.g., Confucianism or Ruism), Taiwanese people have strong sense offamily lineage, which partially explains why extended or multigenerational families are
relatively common in Taiwan and enhances intergenerational transfer. What’s more, as a
famous Chinese saying goes, “Filial piety is the most important of all virtues”, Taiwanesepeople respect, or be good to their elders (i.e., parents, grandparents, etc.) from every
aspect. To sum up, all these demographical and cultural features strengthens the linkage
across multi-generations in Taiwan, which makes it necessary to expand two-generation
analysis to three-generation analysis.
Over last few decades, both economists and sociologists have paid some attention on
mobility across more than two generations, that is, multigenerational mobility. However,most of these studies focused on educational mobility and occupational mobility (e.g.,Behrman and Taubman,1985, Warren and Hauser, 1997, Jaeger, 2012, Zeng and Xie, 2014,
Lindahl et al., 2015, Ferrie et al., 2016). Very few empirical literatures regarding
multigenerational mobility of economic status, for instance, multigenerational earning or
multigenerational income mobility, mainly focused on the U.S. (Olivetti et al., 2018) andEuropean countries (Lucas and Kerr (2013) for Finland, Lindahl et al. (2015) for Malmöof Sweden). 6 As for Asia, there exists no empirical literatures focusing on
multigenerational mobility of economic status to the best knowledge of the author.
The main contribution of this study is that this is the first study of intergenerational
mobility of economic status across three generations not only in Taiwan, but also in Asia.
The primary reason why there exists very rare empirical studies about multigenerational
earning or income mobility is the lacking of datasets which contains information of
earning or income of three or more consecutive generations.7 Based on Panel Study ofFamily Dynamics (PSFD) conducted by Academia Sinica of Taiwan, this study extracts asample which contains data of children’s earning, parents’ earning and grandparents’characteristics. Even though grandparents’ earning, which is essential for analyzing

Solon (2018) provides a more detailed literature review of multigenerational mobility.
Olivetti and Paserman (2015) proposed a method that using first name to create pseudo links acrossgenerations and Olivetti et al. (2018) use this method to analyze IGM across three generations is U.S.

6
7

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Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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intergenerational mobility of economic status across three generations, is not asked in
PSFD, it can be imputed based on their characteristics by employing Two Sample Two
Stage Least Square (TS2SLS) approach, which was firstly used by Björklund and Jäntti
(1997) in their study of IGM in Sweden and U.S., and has been widely used in a plenty of
Asian literatures (Ueda (2009), Lefranc et al. (2008, 2014) for Japan, Ueda (2013) for Korea,
Gong et al. (2012) for urban China, Kan et al. (2015), Sun and Ueda (2015), Chu and Lin(2019) for Taiwan; etc.). 8 In this study, supplementary sample used for imputing
grandfathers’ missing earnings is extracted from Manpower Utilization Survey (MUS)conducted by Directorate-General of Budget, Accounting and Statistics (DGBAS),
Executive Yuan of Taiwan.
Whether grandparents’ condition has a direct and independent effect on grandchildren’s
condition or not is a crucial question in studies of mobility across multi-generations. Some
previous literatures do find such effect, that is to say, the estimated coefficient ofgrandparents’ condition is not small and/or significant (Lucas and Kerr, 2013, Lindahl etal., 2015, Ferrie et al., 2016) even after parents’ condition is controlled, while some others
do not find such effect (Behrman and Taubman, 1985, Warren and Hauser, 1997, Jaeger,2012). To sum up, under different circumstances, the answer to this question isinconclusive. By employing Blanden et al. (2014)’s decomposition method, 9 this study
decomposes the total grandparents’ effect into two parts: (i) direct effect of grandparents’condition on children’s condition and (ii) indirect effect of grandparents’ condition on
children’s condition through its direct effect on parents’ condition. Therefore, this study
may provide a more comprehensive understanding of grandparents’ role in transmissionof economic status, instead of simply answering the question that whether grandparents
have a direct and independent effect on children or not.
The estimation results show that intergenerational elasticity (IGE) between fathers andsons lies around 0.154, while that between grandfathers and fathers lies around 0.349. This
discrepancy might be attributed to life-cycle effect and difference between estimation
methods. IGE between grandfathers and sons lies around 0.159, and over 60% ofintergenerational persistence between grandfathers and sons is transmitted throughparents’ economic status, which means that economic status of grandfathers affects that

8
9

As for statistical properties of TS2SLS estimator, one may refer to Inoue and Solon (2010).
Blanden et al. (2014) use this method to analyze the mechanisms underlie IGM.
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of sons mainly through the indirect way.
The remainder of this paper is organized as follows. Section 2 introduces the empiricalmethodologies. Section 3 explains PSFD and MUS data as well as variables in detail.
Section 4 presents main estimation results and discussion. Section 5 concludes.

2. Empirical Methodologies
The most standard approach of analyzing intergenerational mobility is to estimate socalled intergenerational elasticity (IGE), that is, ! in the following AR (1) equation:log(&'( ) = + + ! log-&('./)( 0 + 1(

(1)

where &'( and &('./)( refers to permanent or lifetime economic status, which is always
measured by income or earning, of generation t and generation t-1, respectively. IGM canbe measured by 1 − !. In this study, economic status is measured by earning, and paternallineage, that is, paternal grandfather-father-son relation, is considered.10

2.1 Father-son relation
The estimation equation for IGE between fathers and sons takes the form of:log(45( ) = +/ + !/ log-467( 0 + 8/ (9:15( ) + 8; -9:1
666667( 0 + </((2)

where 45( is son’s one-year earning, and 467( is father’s five-year average earning. Since
467( is a better proxy for permanent earning, therefore it can mitigate the attenuation bias
caused by classical measurement errors arising from using annual earning to measurepermanent earning (Solon, 1992, Zimmerman, 1992). 8/ (9:15( ) is a fourth-degree
polynomial function of son’s age, and 8; -9:1
666667( 0 is a fourth-degree polynomial functionof father’s five-year average age. Subscript i refers to each father-son pair. !/ is the IGE

10Throughout the entire paper, grandfather refers to paternal grandfather.
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Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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between fathers and sons. OLS is used to estimate equation (2).
Life-cycle bias (Grawe, 2006, Haider and Solon, 2006) is another issue that needs to betaken into consideration. Economic status in early (late) stage of life will underestimate(overestimate) permanent economic status, and this non-classical type of measurement
error may induce so-called life-cycle bias, which will underestimate IGE if children’s(parents’) earning is observed at very young (very old) ages.11 In this study, age of sonsbelongs to [26, 40].12 Fathers’ five-year average age belongs to [27, 72] and fathers whose
five-year average age are equal to or bigger than 55 are excluded. Based on Haider andSolon (2006)’s conclusion that life-cycle bias is big in early 20s and will begin to vibratearound zero from 30 to mid 40s, it is reasonable to believe that life-cycle bias in this study
is relatively minor, especially compared with some previous studies where children’s andparents’ economic status are observed simultaneously in the same survey year, which
implies that children’s economic status is observed at very young ages (e.g., early 20s) whileparents’ economic status is observed at very old ages (e.g., late 50s) (e.g., Ng, 2007, Gong
et al., 2012, Kan et al., 2015).

2.2 Grandfather-father relation and grandfather-son relation
In this study, earning of sons and earning of fathers can be observed. However, earningof grandfathers cannot be observed, which means that it needs to be “imputed” based on
their observable characteristics. Two Sample Two Stage Least Square (TS2SLS) approachis employed here. In the first step, a supplementary sample is used, in which both “pseudo”
grandfathers’ earning and their characteristics can be observed. In the second step,
grandfathers’ earning is imputed based on the first step estimation results by using the
primary sample. The crucial assumption is that pseudo grandfathers have to be
representative of grandfathers’ population.13 To sum up, we have to observe both pseudo
grandfathers’ earning and characteristics in the supplementary sample, while we only need
to observe grandfathers’ characteristics in the primary sample.

Symmetrically, if children’s (parents’) economic status is observed at very old (very young) ages, then theestimation of IGE will be biased upward.
12 Age of sons in this study is relatively young due to the special data structure of PSFD, which will beillustrated in Section 3.1.
13 In other words, both grandfathers and pseudo grandfathers should be randomly drawn from the sameunderlying population.
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Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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The first step equation takes the form of:
@@
@@
@@
@@
@@
log-4>?
0 = A + B/ -C>?
0 + B; -9:1>?
0 + BD -C>?
, 9:1>?
0 + F?

(3)

where superscript II refers to supplementary sample, subscript j refers to each pseudo@@@@
grandfather. 4>?
is pseudo grandfather’s one-year earning. C>?
contains several

common characteristics of both pseudo grandfathers and grandfathers, which will be@@
discussed in detail in Section 3. B/ is a linear function of C>?
. In order to correct life-

cycle bias, grandfathers’ earning is imputed at the age of 40 based on Haider and Solon(2006)’s conclusion that life-cycle bias vibrates around zero from 30 to mid 40s. This isdone by introducing B; and BD . B; is a quadric function of pseudo grandfather’s age,@@@@@@that is, 9:1>?
. BD is a function of interaction terms of variables in C>?
with 9:1>?
;

@@ 14
@@
and 9:1>?
. 9:1>?
is centered at 40. This is the same as Lefranc et al. (2008, 2014)’s

approach. The prediction of grandfather’s earning at the age of 40 is:@
I -4>( 0
BG/ -C>(0 ≝ log (4)where superscript I refers to primary sample, and subscript i refers to each grandfather.
@@@
One should note that variables in C>(
are exactly the same as variables in C>?
.

Thereby, the second step equation for IGE of grandfather-father relation and that for IGE
of grandfather-son relation takes the form of:
I -4>( 0 + 8D -9:1
log-467( 0 = +; + !; log
666667( 0 + <;((5)

I -4>( 0 + J/ -K( × log
I -4>( 00 + 8M (9:15( ) + <D(
log(45( ) = +D + !D log

(6)

and

respectively.15 K( is a dummy variable that equals to 1 if grandfather had passed awaywhen son was born. !; is the IGE between grandfathers and fathers, and !D + J/ K( is

14

@@
@@
@@
@@
For instance, if C>?
contains two variables, N/ @@and N; @@. Then BD -C>?
, 9:1>?
0 = O/ N/ @@
9:1>?
+
>?
>?
>?
;

;

@@
@@
@@
O; N; @@
9:1>?
+ OD N/ @@9:1>?
+ OM N; @@
9:1>?
.
>?
>?
>?
15 Grandfathers’ age is not controlled in equation (5) and (6), since grandfathers’ earning has already been
imputed at the age of 40.

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the IGE between grandfathers and sons.16

2.3 Decomposition of IGE between grandfathers and sonsBased on the spirit of Blanden et al. (2014)’s decomposition method, suppose that
grandfathers’ economic status affects sons’ economic status through two pathways: (i)direct effect and (ii) indirect effect through its effect on fathers’ economic status, as shownin the Figure 2:[Place Figure 2 here]
It can be seen from Figure 2 that son’s earning is influenced by both father’s earning andgrandfather’s earning, that is:
I -4>( 0 + J; -K( × log
I -4>( 00 + 8P (9:15( ) +log(45( ) = +M + !M log-467( 0 + !P log
8Q -9:1
666667( 0 + <M((7)

Then, plug equation (5) into equation (7) and we have:I -4>( 0 + 8P (9:15( ) + 8R -9:1
log(45( ) = 9P + (!P + !; !M + J; K( ) log
666667( 0 + <P((8)

where 9P ≝ +M + +; !M , 8R -9:1
666667( 0 ≝ !M 8D -9:1
666667( 0 + 8Q -9:1
666667( 0, and <P( ≝ <M( +!M <;( . Compare equation (8) with equation (6), it is obvious that!D + J/ K( = !P + !; !M + J; K((9)The indirect effect of grandfathers on sons is measured by !; !M , which is transmitted
through fathers’ economic status. The direct effect is measured by !P + J; K( , whereK( ∈ {0, 1}.17 Grandfathers’ death only affects direct effect.

During the analyses, year dummies are not included in regressions since respondents are drawn fromseveral very close survey years (see Section 3). As shown in footnotes of Section 4, estimation results remain
almost the same after controlling for year dummies.
17 Specifically, ! is IGE between fathers and sons after controlling grandfathers’ economic status, andM!P + J; K( is IGE between grandfathers and sons after controlling fathers’ economic status.
16

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3. Data
3.1 Primary sample: R survey of Panel Study of Family Dynamics (PSFD)
Primary sample is extracted from R survey of Panel Study of Family Dynamics (PSFD)
conducted by Academic Sinica of Taiwan. PSFD is an annual longitudinal survey from1999 (from 2012, it became a biennial survey), which is representative of all Taiwanesehouseholds. PSFD has 3 different surveys: R survey, RCI survey and C survey. R survey isthe core survey of PSFD, and it contains 5 cohorts: (1) 1953~1964 cohort (initial cohort),(2) 1935~1954 cohort (added in 2000), (3) 1964~1976 cohort (added in 2003), (4)1977~1983 cohort (added in 2009), and (5) 1984~1991 cohort (added in 2016). These 5cohorts of respondents are called the “main respondents” of PSFD. C survey and RCI
survey was conducted from 2000 and 2004, respectively. C survey consists of children of
main respondents aged 16 to 24, while RCI survey consists of children of main
respondents aged 25. From 2005, children of main respondents aged 26 and older wereadded into main respondents and surveyed by questionnaire for R survey.
In this study, fathers are extracted from first 3 cohorts of main respondents, while sonsare extracted from children of these 3 cohorts of main respondents aged 26 and older.
Due to this special data structure, sons in this study are relatively young (aged 26 to 40).18
PSFD assigns each household an identification number, based on which I can identify eachfather-son pair. Grandfathers’ information is reported ex post by fathers. To sum up,
grandfathers’ data and fathers’ data are from 1999’s, 2000’s and 2003’s R survey of PSFD,
while sons’ data is from 2016’s, 2014’s and 2012’s R survey of PSFD. However, PSFD
does not ask for grandfathers’ earning or income, but only their characteristics (education,
occupation, etc.) based on which their earning can be imputed. Therefore, a supplementary
sample will be used for imputing grandfathers’ missing earnings.

3.2 Supplementary sample: Manpower Utilization Survey (MUS)When deciding which supplementary sample to use, one should be careful of choosing thesuitable period. In this study, Grandfathers’ age is centered at early-mid 70s from 1999 to

In this study, since sample size is relatively small, therefore sons whose age are younger than 30 (aged 26
to 29) are not dropped. As Haider and Solon (2006) shows, life-cycle bias in late 20s is much smaller thanlife-cycle bias in early 20s.

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2003, and it is roughly 30 years ago that grandfathers were in their mid-career. This meansthat the ideal supplementary sample should be drawn from early 1970s. In Taiwan, however,
the earliest micro-data I can get is conducted from 1976 (Survey of Family Income andExpenditure (SFIE)) or 1978 (Manpower Utilization Survey (MUS)). Supplementary
sample is extracted from MUS 1978-1979, since compared with SFIE, MUS is morecomparable to PSFD, the primary sample, and therefore is easier to operate. MUS 19781979 is conducted in late 1970s, and it is not very far from early 1970s. Therefore, theassumption that both pseudo grandfathers and grandfathers are randomly drawn from thesame underlying population is relatively reliable.
MUS is an annual repeated cross-sectional data from 1978 conducted by DirectorateGeneral of Budget Accounting and Statistics (DGBAS), Executive Yuan of Taiwan. It isa representative data of Taiwanese civilian population aged 15 and older (with the
exception of current in-service soldiers and incarcerated population). MUS contains
detailed information on earning, employment status and several social-demographicalcharacteristics (education, marital status, living area, etc.). It is an ideal dataset for analyzing
earning structure.

3.3 Variables
Son’s annual earning is used to measure economic status of son, and father’s 5-year average
earning is used to measure economic status of father. Annual earning equals pre-tax realannual salary plus bonus over the past year. 19 Pseudo grandfather’s annual earning isobserved in supplementary sample, and grandfather’s economic status is measured by
imputing value by using TS2SLS method as mentioned in Section 2.2. Throughout the
paper, part-time jobs earnings are not taken into consideration.
Three characteristics, that is, education, occupation and self-employment status are usedas predictors for grandfather’s economic status. Education classification in PSFD and MUS
is different,20 and I categorize education into 6 levels: (1) illiteracy and self-study (i.e., noformal education), (2) elementary school, (3) junior high school and vocational junior highschool, (4) senior high school, vocational high school and first 3 years of junior college ofAnnual earning is adjusted based on annual CPI, where CPI in 2016 equals 100. (Data source: DGBAS,
Executive Yuan)
20 PSFD divides education into 16 categories, while MUS only divides education into 8 categories.
19

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5-year program, (5) junior college (including junior college of 2-year, 3-year, and 5-year
program)21 and (6) university (both undergraduate and graduate program). In both PSFD
and MUS, occupation is divided into 7 categories based on the International Standard
Classification of Occupation 1968 (ISCO-68): (1) professional, technical and related
workers, (2) administrative and managerial workers, (3) clerical and related workers, (4)sales workers, (5) service workers, (6) agricultural, animal husbandry and forestry workers,
fishermen and hunters and (7) production and related workers, transport equipment
operators and labourers. It should be noted that for grandfathers in PSFD, occupationrefers to their “major” occupations in their entire careers. While for pseudo grandfathers
in MUS, occupation refers to their occupations at that point of time. Besides educationand occupation, an indicator of self-employment status is also used to impute grandfather’s
earning.

3.4 Sample selection and descriptive statistics
For sons, those who have no earning report are dropped.22 As for fathers, since I use 5year average of annual earning to measure their economic status, therefore if I can observeat least one earning report in the first survey round and the four following survey rounds,
then I do not exclude it. Moreover, fathers whose 5-year average age are equal to or greaterthan 55 are dropped in order to control the life-cycle bias. In order to impute grandfathers’
missing earnings, fathers who do not report their fathers’ characteristics are also excluded.
After selection, I merge sons, fathers and grandfathers into three samples based onhousehold identification number provided by PSFD. Sample 1 contains 562 father-son
pairs living in 425 households, which is used for estimating father-son relation. Sample 2
contains 1,721 grandfather-father pairs living in 1,721 households, which is used for
estimating grandfather-father relation. Sample 3 consists of 379 grandfather-father-son
observations living in 283 households, which is used for estimating grandfather-son

Based on education system of Taiwan, students who graduate from junior high school may choose toenroll in junior college of 5-year program. If they complete this 5-year study, they will get junior college
degree. For students who graduate from senior high school, they may choose to enroll in junior college of
2-year program or 3-year program. If they complete this 2-year or 3-year study, they will get junior college
degree as well. However, the students who enroll in junior college of 5-year program but only complete first3-year study will only get vocational high school degree. Moreover, vocational junior high school and juniorcollege of 3-year program have been abolished in current education system in Taiwan.
22 For instance, those who have no earning, those who refuse to answer and those who do not remember.
21

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Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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relation. Descriptive statistics for these three primary samples is shown in Table 1.
[Place Table 1 here]
As for pseudo grandfathers in MUS, those who have no earning report are dropped. Plus,
those who do not report their characteristics are also dropped. As shown in Table 1,
average age of grandfathers in survey years (i.e., 1999, 2000 and 2003) is 70.9 or 76.1,
which implies that their average age should belongs to [45.9, 56,1] from 1978 to 1979 (20to 25 years ago). Therefore, pseudo grandfathers in MUS whose age are older than 59 or
younger than 40 are also excluded. At the end, there is 12,557 pseudo grandfathers in MUS.
Table 2 shows descriptive statistics for supplementary sample.
[Place Table 2 here]
One important assumption for TS2SLS is that both primary sample and supplementary
sample are randomly drawn from the same underlying population. Figure 3 shows thecomparison between pseudo grandfathers and grandfathers. As shown in Figure 3, thedistribution of characteristics among grandfathers and pseudo grandfathers does not varythat much, which implies that this assumption generationally holds in this study.
[Place Figure 3 here]

4. Estimation Results
4.1 Father-son relation
The estimate of intergenerational elasticity between fathers and sons based on sample 1 isshown in Table 3. Errors are clustered at household level.
[Place Table 3 here]
As shown in the column (1) of Table 3, the estimate of intergenerational elasticity between
fathers and sons is 0.154. Since age of sons in this study is relatively young (26 to 40) due
11Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
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to data structure as mentioned in Section 3.1 and OLS, instead of TS2SLS, is used here,
therefore this result is smaller than results in previous Taiwanese studies (0.18 in Kan et al.
(2015), 0.18 to 0.30 in Sun and Ueda (2015), 0.47 in Chu and Lin (2019)). In column (2)where fathers’ economic status is measured by parents’ earning, IGE between parents andsons is 0.197, and the difference between these two estimates is significant at conventional
level. 23 One possible explanation is that parents’ earning is a better proxy for family
background, which contains more resources that can be transmitted from fathers’
generation to sons’ generation, and therefore may play a more important role than fathers’
own earning.24

4.2 Grandfather-father relation and grandfather-son relation
The estimate of intergenerational elasticity between grandfathers and fathers based on
sample 2 as well as that between grandfathers and sons based on sample 3 are shown in
Table 4. Errors are clustered at household level. The estimation results of first step thatusing MUS 1978-1979 to estimate equation (3) is shown in Table A-1 in the Appendix.
The W; for first step equation is 0.36, which indicates that education, occupation andself-employment status are strong earning predictors.25[Place Table 4 here]
Column (1) of Table 4 shows the estimation results for grandfather-father relation. The
estimate of IGE between grandfathers and fathers is 0.349, higher than that in Kan et al.
(2015) (0.18) and Sun and Ueda (2015) (0.18 to 0.30), but smaller than that in Chu and Lin(2019) (0.47).26 IGE estimate for grandfather-father relation is much higher than that for
father-son relation. One explanation is life-cycle effects. In Section 4.1, sons’ age is from26 to 40 with an average age of 32.8 while fathers’ 5-year average age is from 36.3 to 54.5
with an average of 47.3. In this section, however, fathers’ 5-year average age is from 27 to
54.8 with an average of 41.3, while the earning of grandfathers is imputed at the age of
40. Such age patterns will make IGE estimates for sons much smaller than that for fathers
because of the life-cycle patterns of earning or income. What’s more, in Section 4.1, OLS
Bootstrap Wald Test is used here. X ; (1) Statistic is 4.08 (p<0.05) (number of replications = 500).
After adding year dummies, the estimate of IGE between fathers and sons is 0.151, while that between
parents and sons is 0.195.
25 W2 for first step equation is 0.35 after dropping all the age controls (i.e., B and B ).
;D
26 After adding year dummies, the estimate of IGE between grandfathers and fathers is 0.352.
23
24

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is used and fathers’ earning is averaged over 5 years. While in this section, TS2SLS is used
and imputed values are used to replace grandfathers’ missing earnings. Differences in
estimation methods may further enlarge the gap between IGE estimate for sons and thatfor fathers. Moreover, from sons’ generation to fathers’ generation, Taiwan experienced
very rapid economic growth and dramatic social changes (e.g., democratization andTaiwanization).27 Such prosperous economy and pluralistic society may also contribute toincreasing in IGM, that is, decreasing in IGE, from fathers’ generations to sons’
generations since children have more opportunities to get rid of the effect of family
background. However, Chu and Lin (2019) found that for children in 1990-1994 periods
and for children in 2005-2010 periods, IGE remains almost the same, which implies thatthe so-called “Taiwan Miracle” does not increase the intergenerational mobility.
Column (2) of Table 4 shows the estimation results for grandfather-son relation. The
estimate of IGE between grandfathers and sons is 0.159 and is statistically significant (p= 0.052).28 This result indicates that in Taiwan, grandparents’ economic status does affectsons’ economic status. After considering grandfather’s death, it is surprising to find thatthe death of grandfather only reduces IGE by 0.009, although it is statistically significant(p = 0.058).29 It means that although grandfather had passed away when son was born,which indicates that they do not have any chance to meet each other in this life,
grandfather’s economic status can still be stably transmitted to his grandson.

4.3 Decomposition of IGE between grandfathers and sons
Next, IGE between grandfathers and sons is decomposed based on Blanden et al. (2014)’s
method as mentioned in Section 2.3. Decomposition results is shown in Table 5. In thispart, all the analyses are conducted in sample 3.30
[Place Table 5 here]

Chu and Lin (2019) provides a more detailed description of background in Taiwan.
After adding year dummies, the estimate of IGE between grandfathers and sons is 0.156.
29 Here, “death of grandfather” means that grandfather had passed away when son was born as mentioned
in Section 2.2. If death of grandfather is defined as grandfather had passed away when son was three years
old (six years old), then death of grandfather will reduce IGE by -0.007 with p = 0.132 (-0.006 with p =0.299).
30 The same as Section 4.1 and 4.2, errors are clustered at household level, and year dummies are excluded.
27
28

13

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

In the top panel of Table 5, fathers’ economic status is measured by own earning. After
controlling for both fathers’ economic status and grandfathers’ economic status, theestimate of IGE for sons wrt. fathers is 0.144. The estimate of IGE for fathers wrt.
grandfathers is 0.460 after re-estimating equation (5) in sample 3. This means that theindirect effect of grandfathers’ economic status, which is transmitted through fathers’
economic status, is 0.066, which can explain about 41.46% of IGE between grandfathers
and sons.
In the bottom panel of Table 5, fathers’ economic status is measured by parents’ earning.
The estimate of IGE for sons wrt. parents after controlling for both parents’ andgrandfathers’ economic status is 0.201, while the estimate of IGE for parents wrt.
grandfathers is 0.497. These results indicate that the indirect effect of grandfathers’
economic status is 0.100, which can explain about 62.83% of IGE between grandfathers
and sons. Lastly, if grandfather had passed away when son was born, then the percentagesof indirect effect are higher. One should note that the estimate of IGE for parents wrt.
grandfathers is higher than that for fathers wrt. grandfathers.31 This reflects the effect ofassortative mating on IGM. As summarized by Chadwick and Solon (2002), the IGE ofchild’s couple wrt. child’s parents equals to the weighting average of the IGE of child wrt.
his own parents and the IGE of child’s spouse wrt. her parents-in-law. The weighting
factor is the share of child’s own earning / income in couple’s total earning / income.
Therefore, this result implies that IGE for fathers’ spouses wrt. their fathers-in-law ishigher than IGE for fathers’ wrt. their own fathers, which further indicates that marriage
will reduce IGM (i.e., increase IGE) in fathers’ generation because of the effect ofassortative mating.
These decomposition results indicate that, most of grandparents’ effect on grandchild istransmitted through its direct effect on parents. Meanwhile, more researches are neededfor exploring the remaining 30% to 40% of grandfathers’ effect, which can be divided into
two parts based on the spirit of this study: (1) indirect effect through its effect on otherrelatives (e.g., uncles, aunts, …) that might effect sons’ economic status; (2) unexplained
part that might be attributed to grandfathers’ direct and independent effect on sons’economic status.

31

The difference, however, is insignificant (X ; (1) Statistic for Bootstrap Wald Test is 0.67 with p>0.40).
14

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

5. Conclusion
This study provides initial evidence of intergenerational mobility of economic statusacross multi-generations in Asian world. Father-son relation, grandfather-father relation as
well as grandfather-son relation are considered, and grandfathers’ earning is imputed basedon their characteristics by applying Two-Sample Two-Stage Least Square method.
Estimation results indicate that the intergenerational elasticity between fathers and sonslies around 0.154, and the intergenerational elasticity between grandfathers and fathers lies
around 0.349. The difference between these two estimates might be attributed to life-cycle
effect and difference between OLS and TS2SLS. This study also finds that theintergenerational elasticity between grandfathers and sons lies around 0.159 and issignificant, which indicates that grandparents’ economic status does affect children’s
economic status in Taiwan. Grandfathers’ death does not affect estimation results muchalthough it has significant negative effect. After controlling for fathers’ or both parents’earning, decomposition results indicate that fathers’ earning can explain 41.66% to 44.16%
of IGE between grandfathers and sons, while both parents’ earning can explain 62.83%
to 66.60% of IGE between grandfathers and sons. This means that grandparents’economic status mainly affects children’s economic status indirectly.

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18

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Table 1 Descriptive statistics for three primary samples

Sample 1:
father-son
relation (n =562)

Variable

Mean

S.D.

Min.

Max.

annual earning of son

13.17

0.54

9.44

15.52

5-year average earningof father

13.21

0.61

10.94

15.27

5-year average earningof parents

13.54

0.62

10.94

15.47

son’s age

32.76

3.36

26.00

40.00

father’s 5-year average
age

47.32

3.96

36.33

54.50

5-year average earningof father

13.34

0.59

9.33

16.15

father’s 5-year average
age

41.33

6.97

27.00

54.75

grandfather’s age insurvey year

70.92

9.79

45.00

107.00

grandfather’s education (ref: illiteracy and self-study)
elementary school

46.78%

0.50

junior high school

10.11%

0.30

senior high school
11.45%
0.32
Sample 2:
junior college
2.73%
0.16
grandfather-fa
5.11%
0.22
ther relation university(n = 1,721)
grandfather’s occupation (ref: agricultural)
professional

5.29%

0.22

administrative andmanagerial

6.51%

0.25

clerical

8.66%

0.28

sales

10.75%

0.31

service

8.31%

0.28

production

26.21%

0.44

self-employed54.56%

0.50

19

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Table 1 Descriptive statistics for three primary samples (Continued)
Sample 3:
grandfather- sonrelation (n =379)annual earning of son

13.20

0.55

9.44

15.52

5-year average earningof father

13.24

0.64

10.94

15.27

5-year average earningof parents

13.56

0.64

10.94

15.47

son’s age

32.57

3.41

26.00

40.00

father’s 5-year average
age

47.01

3.93

36.50

54.50

grandfather’s age insurvey year

76.08

8.06

56.00

98.00

grandfather’s deathwhen son was born

0.16

0.37

grandfather’s education (ref: illiteracy and self-study)
elementary school

46.17%

0.50

junior high school

9.23%

0.29

senior high school

5.80%

0.23

junior college

1.32%

0.11

university

2.90%

0.17

grandfather’s occupation (ref: agricultural)
professional

2.90%

0.17

administrative andmanagerial

2.90%

0.17

clerical

11.35%

0.32

sales

7.12%

0.26

service

5.01%

0.22

production

20.05%

0.40

self-employed

64.91%

0.48

Notes:
1.

Earnings are in form of logarithm.

20Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Table 2 Descriptive statistics for supplementary sample
Variable

Mean

S.D.

Min.

Max.

pseudo grandfather’s annual
earning

12.22

0.60

8.53

15.03

pseudo grandfather’s age

48.47

5.54

40.00

59.00

pseudo grandfather’s education (ref: illiteracy or self-study)
elementary school

53.93%

0.50

junior high school

10.34%

0.30

senior high school

10.25%

0.30

junior college

2.82%

0.17

university

4.44%

0.21

pseudo grandfather’s occupation (ref: agricultural)
professional

4.60%

0.21

administrative and managerial

2.44%

0.15

clerical

10.47%

0.31

sales

11.28%

0.32

service

8.41%

0.28

production

28.59%

0.45

self-employed

48.41%

0.50

Notes:
1.

Num. of obs. = 12,557.

2.

Earnings are in form of logarithm.

21

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Table 3 Intergenerational elasticity between fathers and sonslog (father’s 5-year
average earning)log (parents’ 5-year
average earning)age of son(age of son)2(age of son)3(age of son)45-year average age offather(5-year average age offather)2(5-year average age offather)3(5-year average age offather)4
constant(1)log (son’s annual
earning)0.154***(0.044)-14.191(24.282)0.683(1.126)-0.014(0.023)0.000(0.000)1.781(18.258)-0.042(0.606)0.000(0.009)-0.000(0.000)95.177(280.774)
562
0.104

(2)
log (son’s annual
earning)

0.197***(0.039)-12.870(23.798)
0.618(1.103)-0.013(0.023)0.000(0.000)0.370(18.446)
0.001(0.612)-0.000(0.009)0.000(0.000)101.900(278.979)
562
0.124

Obs.
R-squared
Notes:
1. Robust standard errors are in parenthesis (errors are clustered athousehold level).
2. *** p<0.01, ** p<0.05, * p<0.1.

22Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Table 4 Intergenerational elasticity between grandfathers and fathers as well as that between grandfathers
and sons

grandfathers’ earning at 40(imputed value)
grandfathers’ earning at 40(imputed value)× death of grandfather
5-year average age offather(5-year average age offather)2(5-year average age offather)3(5-year average age offather)4
age of son(1)
log (father’s 5-year
average earning)
0.349***(0.039)-2.139(1.408)0.088*(0.053)-0.002*(0.001)0.000*(0.000)(age of son)2(age of son)3(age of son)4
constantObs.
R-squared(2)log (son’s annual
earning)
0.159*(0.082)-0.009*(0.005)27.462**(13.795)
1721
0.065

0.827
(28.714)0.001(1.328)-0.001(0.027)0.000(0.000)-2.335(231.919)
379
0.093

Notes:
1. Robust standard errors are in parenthesis (errors are clustered athousehold level).
2. *** p<0.01, ** p<0.05, * p<0.1.

23

Robust standard errors are in parenthesis (errors are clustered at household level).

*** p<0.01, ** p<0.05, * p<0.1.

2.

0.150

0.159

alive (!" = 0)

dead (!" = 1)

0.150

dead (!" = 1)

0.201***(0.045)(0.127)(0.053)(0.134)0.497***

0.144***

sons (#) )IGE between fathers and

0.460***

and fathers (#( )(#$ + &' !" )0.159

IGE between grandfathers

decomposition

grandfathers and sonstotal IGE between

1.

Notes:

parents’ earning

fathers’ own earning(!" )economic status

alive (!" = 0)

grandfathers’ deathmeasurement of fathers’

Table 5 Decomposition results

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan

66.60%

62.83%

44.16%

41.66%

24

explained by indirect effectpercentage of IGE that is

Zhi-xiao Jia

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Living arrangement of aged Taiwanese people (aged 65 and older)
50%
48%
45%
43%
40%
38%
35%
33%
30%
28%
25%
23%
20%
18%
15%
13%
10%
8%
5%
3%
0%
2005
3-generation families

2009
4-generation families

2013

2017

co-residence only with grandchildren

Figure 1 Living arrangement of aged Taiwanese people (aged 65 and older)
Data source: Report of the Senior Citizen Condition Survey, Ministry of Health and Welfare25Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

grandfather's
economic status

father's
economic status

son's
economic status

Figure 2 Effect of grandfathers’ economic status on sons’ economic status

26

Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Comparsion between grandfathers and pseudo grandfathers
65%
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
on
em
pl
oy
ed
se
lf-

pr
od
uc
ti

se
rv
i ce

sa
les

ric
al
cle

ele

m
en
tar
ys
ju
ch
ni
oo
or
l
hi
gh
sc
se
ho
ni
or
ol
hi
gh
sc
ho
ol
ju
ni
or
co
lle
ge
un
ive
ad
rsi
m
ty
in
pr
ist
of
ra
e
tiv
ss
io
ea
na
nd
l
m
an
ag
er
ial

0%

pseudo grandfathers

grandfathers in primary sample 3

grandfathers in primary sample 2

Figure 3 Comparison between grandfathers and pseudo grandfathers

27Intergenerational Mobility of Economic Status across Three Generations: The Case of Taiwan
Zhi-xiao Jia

Appendix
Table A-1: First step regression results
elementary school
junior high school
senior high school
junior college
university
professional
administrative andmanagerial
clerical
sales
serviceproduction
self-employed(age – 40)(age – 40)2
constantObs.
R-squared

0.063**(0.031)0.135***(0.042)0.337***(0.049)0.448***(0.080)0.592***(0.066)0.645***(0.060)1.004***(0.078)0.652***(0.048)0.707***(0.040)0.471***(0.049)0.561***(0.031)0.179***(0.027)-0.010(0.010)0.000(0.001)
11.695***(0.037)
12557
0.355

elementary school ×(age – 40)
junior high school ×(age – 40)
senior high school ×(age – 40)
junior college × (age –40)
university × (age – 40)
elementary school ×(age – 40)2
junior high school ×(age – 40)2
senior high school ×(age – 40)2
junior college × (age –40)2university × (age – 40)2

0.007
(0.008)0.010(0.011)-0.015(0.013)-0.038*(0.020)-0.028*(0.017)-0.000(0.000)-0.000(0.001)0.001(0.001)0.002**(0.001)0.001(0.001)

professional × (age – 40)
administrative andmanagerial × (age – 40)
clerical × (age – 40)
sales × (age – 40)
service × (age – 40)
production × (age – 40)
Professional × (age –40)2administrative andmanagerial × (age – 40)2
clerical × (age – 40)2
sales × (age – 40)2
service × (age – 40)2
production × (age – 40)2
self-employed × (age –40)
self-employed × (age –
40)2

0.008
(0.016)0.016(0.022)0.019(0.013)-0.029**(0.011)-0.004(0.012)-0.001(0.009)0.000(0.001)0.000(0.001)-0.001(0.001)0.002**(0.001)-0.000(0.001)-0.000(0.001)-0.007(0.008)0.000(0.000)Notes:
1. Robust standard errors are in parenthesis.
2. *** p<0.01, ** p<0.05, * p<0.1.
3. Dependent variable is logarithm of pseudo grandfathers’ annual earning.
4. Year dummies are not included in regressions (After adding year dummies, estimation results remain almost the same.).

28