The major purpose of this study was to examine the effects of socio-economic status (SES) on changes in functional abilities, as measured by Activities of Daily Living (ADL) scales, among older people in Taiwan. A prospective longitudinal study design was used. A panel of 874 community-dwelling older people were followed over four years (1994 to 1998). Three SES indicators, education, having ‘extra’ money (more than required for basic necessities), and principal lifetime occupation were included in separate multiple logistic regression models of functional change in physical ADL (PADL) and in instrumental ADL (IADL). Over the four years, the study cohort experienced greater decreases in IADL functioning than in PADL functioning. Having ‘extra’ money was significantly and negatively associated with PADL decline, while level of education had a strong positive relationship with IADL functioning. In addition to SES, age was significantly associated with PADL and IADL functioning change. The paper also reports a comparison of similar findings from several eastern and western countries. This has established that among the available SES indicators, the level of education has most consistently been shown in both eastern and western population studies to be related to health and health change, and that self-perceived economic resource is also related to older people's health in Asian populations.