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The dynamics of social assistance benefit receipt in Britain

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  • Cappellari, Lorenzo
  • Jenkins, Stephen P.

Abstract

We analyze the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate, rather than by the SA exit rate (which actually declined too). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA entry and exit probabilities applied to British Household Panel Survey data. The model estimates and accompanying counterfactual simulations highlight the importance of two factors – the decline in the unemployment rate over the period, and other changes in the socioeconomic environment including two reforms to the income maintenance system in the 1990s. The results also reveal a substantial heterogeneity in SA annual transition rates.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2009-29.

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Date of creation: 22 Sep 2009
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Publication status: published
Handle: RePEc:ese:iserwp:2009-29

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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. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. David C. Ribar, 2005. "Transitions from Welfare and the Employment Prospects of Low-Skill Workers," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 514-533, January.
  3. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
  4. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain," OECD Social, Employment and Migration Working Papers 67, OECD Publishing.
  5. Steven Haider & Jacob Alex Klerman, 2003. "Dynamic Properties of the Welfare Caseload," Working Papers, RAND Corporation Publications Department 03-08, RAND Corporation Publications Department.
  6. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  7. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, Elsevier, vol. 13(6), pages 699-720, December.
  8. Lorenzo Cappellari & Stephen P. Jenkins, 2002. "Modelling Low Income Transitions," Discussion Papers of DIW Berlin 288, DIW Berlin, German Institute for Economic Research.
  9. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002, International Conferences on Panel Data B2-4, International Conferences on Panel Data.
  10. Blundell, Richard, 2001. "Welfare Reform for Low Income Workers," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 189-214, April.
  11. Manning, Alan, 2009. "You can't always get what you want: The impact of the UK Jobseeker's Allowance," Labour Economics, Elsevier, Elsevier, vol. 16(3), pages 239-250, June.
  12. Paul Gregg & Susan Harkness & Sarah Smith, 2007. "Welfare Reform and Lone Parents in the UK," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 07/182, Department of Economics, University of Bristol, UK.
  13. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
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Cited by:
  1. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2014. "Time aggregation and state dependence in welfare receipt," Discussion Papers, Research Department of Statistics Norway 771, Research Department of Statistics Norway.
  2. Regina T. Riphahn & Christoph Wunder, 2013. "State Dependence in Welfare Receipt: Transitions Before and After a Reform," CESifo Working Paper Series 4485, CESifo Group Munich.
  3. Thomas Andrén & Daniela Andrén, 2013. "Never give up? The persistence of welfare participation in Sweden," IZA Journal of European Labor Studies, Springer, Springer, vol. 2(1), pages 1-21, December.
  4. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance," Working Papers, Örebro University, School of Business 2013:7, Örebro University, School of Business.
  5. Nicolas Hérault & Guyonne Kalb & Rezida Zakirova, 2011. "Dynamics of Household Joblessness: Evidence from Australian Micro-Data 2001–2007," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2011n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  6. Drinkwater, Stephen & Robinson, Catherine, 2011. "Welfare Participation by Immigrants in the UK," IZA Discussion Papers 6144, Institute for the Study of Labor (IZA).
  7. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance in the 1990s: What happened to those who were single before the recession?," Working Papers, Örebro University, School of Business 2013:10, Örebro University, School of Business.
  8. Peter R. Mueser & Colleen M. Heflin, 2013. "Aid to Jobless Workers in Florida in the Face of the Great Recession: The Interaction of Unemployment Insurance and the Supplemental Nutritional Assistance Program," Working Papers, Department of Economics, University of Missouri 1318, Department of Economics, University of Missouri.

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