The Persistence of Welfare Participation
AbstractWelfare persistence is estimated in and compared between Swedish-born and foreignborn households. This is done within the framework of a time-stationary dynamic discrete choice model controlling for the initial condition and unobserved heterogeneity. Three different types of persistence are controlled for in terms of observed and unobserved heterogeneity, serial correlation, and structural state dependence, the focus being on the latter measure. In a second step we analyze the long-run effects of receiving social assistance on future household earnings and disposable income. The results show that state dependence in Swedish welfare participation is strong in both Swedish-born and foreign-born. However, the size of the effect is three times as large for the latter group. When the effect is distributed over time, it disappears after three years for both groups. The effect of structural state dependence is decomposed into a number of observed explanatory factors. Surprisingly small effects are found from typical foreign-born factors such as time in the country and country of origin, both important determinants for welfare participation in general. When investigating the effect of social assistance participation on future earnings, we find a strong and persistent effect over the whole observation window, while no such effect could be found for disposable income. This indicates that the economic incentives to leave the dependency are very weak. The picture is similar for both Swedish-born and foreign-born, even though the negative earnings effect is somewhat larger for the latter.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 266.
Length: 34 pages
Date of creation: 28 Sep 2007
Date of revision:
Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC
welfare participation; immigrants; dynamic probit model; persistence; state dependence; unobserved heterogeneity; initial condition; GHK simulator; earnings; disposable income;
Other versions of this item:
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-06 (All new papers)
- NEP-DCM-2007-10-06 (Discrete Choice Models)
- NEP-LTV-2007-10-06 (Unemployment, Inequality & Poverty)
- NEP-MIG-2007-10-06 (Economics of Human Migration)
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