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Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition?

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  • Biewen, Martin

    ()
    (University of Tuebingen)

Abstract

Using a sample of prime-aged men from the German Socio-Economic Panel (GSOEP), this paper examines the effects of past poverty experience on future poverty status, future employment status and household composition. The empirical results suggest that even after controlling for observed and unobserved characteristics, past poverty experience increases the poverty risk of future periods. Moreover, there is evidence that experiencing poverty has a negative effect on future employment behaviour and on household cohesion. Apart from its economic significance, the existence of such feedback effects is interesting from an econometric point of view, as they represent a violation of the strict exogeneity assumption, which is usually invoked in estimating dynamic qualitative response models with unobserved heterogeneity.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1138.

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Length: 30 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1138

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Keywords: correlated random effects; poverty persistence; strict exogeneity; initital conditions; dynamic binary response models;

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  1. Arnstein Aassve & Simon Burgess & Carol Propper & Matt Dickson, 2003. "Employment, family union, and childbearing decisions in Great Britain," MPIDR Working Papers WP-2003-027, Max Planck Institute for Demographic Research, Rostock, Germany.
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  14. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
  15. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
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  17. Gong, Xiaodong, 2004. "Transition Patterns for the Welfare Reliance of Low Income Mothers in Australia," IZA Discussion Papers 1047, Institute for the Study of Labor (IZA).
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