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Modelling low income transitions

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  • Cappellari, Lorenzo
  • Jenkins, Stephen P.

Abstract

We examine the determinants of low income transitions using first-order Markov models that control for initial conditions effects (those found to be poor in the base year may be a non-random sample) and for attrition (panel retention may also be non-random). Our econometric model is a form of endogeneous switching regression, and is fitted using simulated maximum likelihood methods. The estimates, derived from British panel data for the 1990s, indicate that there is substantial genuine state dependence in poverty. We also provide estimates of low income transition rates and lengths of poverty and non-poverty spells for persons of different types.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2002-08.

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Date of creation: 01 May 2002
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Publication status: published
Handle: RePEc:ese:iserwp:2002-08

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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  1. Cappellari, Lorenzo, 2004. "Earnings Mobility Among Italian Low Paid Workers," IZA Discussion Papers 1068, Institute for the Study of Labor (IZA).
  2. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  3. Francesco Devicienti, 2001. "Estimating Poverty Persistence in Britain," 10th International Conference on Panel Data, Berlin, July 5-6, 2002, International Conferences on Panel Data B2-3, International Conferences on Panel Data.
  4. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
  5. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
  6. Stewart, M.B. & Swaffield, J.K., 1997. "Low Pay Dynamics and Transition Probabilities," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 495, University of Warwick, Department of Economics.
  7. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 1-25, January.
  8. Ann Huff Stevens, 1995. "Climbing Out of Poverty, Falling Back In: Measuring the Persistence of Poverty over Multiple Spells," NBER Working Papers 5390, National Bureau of Economic Research, Inc.
  9. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  10. Sarah Jarvis & Stephen P. Jenkins, 1997. "Marital Splits and Income Changes: Evidence for Britain," Innocenti Occasional Papers, Economic Policy Series, UNICEF Innocenti Research Centre iopeps97/26, UNICEF Innocenti Research Centre.
  11. Gerard J. van den Berg & Maarten Lindeboom, 1998. "Attrition in Panel Survey Data and the Estimation of Multi-State Labor Market Models," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 458-478.
  12. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 749-64, July.
  13. Sloane, P J & Theodossiou, I, 1996. "Earnings Mobility, Family Income and Low Pay," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(436), pages 657-66, May.
  14. Stephen P. Jenkins, 2000. "Modelling household income dynamics," Journal of Population Economics, Springer, Springer, vol. 13(4), pages 529-567.
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