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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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Author Info
Biewen, Martin () (University of Mannheim, DIW Berlin and IZA Bonn)

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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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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
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Handle: RePEc:iza:izadps:dp1138

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

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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References listed on IDEAS
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  2. Arellano, Manuel & Carrasco, Raquel, 2003. "Binary choice panel data models with predetermined variables," Journal of Econometrics, Elsevier, vol. 115(1), pages 125-157, July. [Downloadable!] (restricted)
    Other versions:
  3. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "Simulation-based inference in dynamic panel probit models: An application to health," Empirical Economics, Springer, vol. 29(1), pages 49-77, January. [Downloadable!] (restricted)
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  4. Muhleisen, Martin & Zimmermann, Klaus F., 1994. "A panel analysis of job changes and unemployment," European Economic Review, Elsevier, vol. 38(3-4), pages 793-801, April. [Downloadable!] (restricted)
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  12. Andrea Weber, 2002. "State dependence and wage dynamics: a heterogeneous Markov chain model for wage mobility in Austria," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D2-2, International Conferences on Panel Data. [Downloadable!]
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  13. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier. [Downloadable!] (restricted)
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  14. Fitzgerald, John M. & Ribar, David C., 2003. "Transitions in Welfare Participation and Female Headship," IZA Discussion Papers 895, Institute for the Study of Labor (IZA). [Downloadable!]
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  16. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
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  17. Simon Burgess & Carol Propper & Matt Dickson, 2006. "The analysis of poverty data with endogenous transitions," Fiscal Studies, Institute for Fiscal Studies, vol. 27(1), pages 75-98, March.
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  18. Bo Honoré, 2002. "Nonlinear Models with Panel Data," CAM Working Papers 2002-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gianni Amisano & Maria Letizia Giorgetti, . "The Dynamics of Firms' Entry and Diversification: A Bayesian Panel Probit Approach. A Cross-country analysis," Working Papers ubs0408, University of Brescia, Department of Economics. [Downloadable!]
  2. repec:ese:iserwp: is not listed on IDEAS
  3. Gianni Amisano & Maria Letizia Giorgetti, 2005. "Entry in Pharmaceutical submarkets: A Bayesian Panel Probit Approach," Working Papers ubs0511, University of Brescia, Department of Economics. [Downloadable!]
  4. Nilsson, William, 2005. "Equality of Opportunity, Heterogeneity and Poverty," UmeÃ¥ Economic Studies 652, Umeå University, Department of Economics. [Downloadable!]
  5. Nilsson, William, 2005. "Heterogeneity or True State Dependence in Poverty - The tale told by twins," UmeÃ¥ Economic Studies 650, Umeå University, Department of Economics. [Downloadable!]
  6. Bettina Peters, 2005. "Persistence of Innovation: Stylised Facts and Panel Data Evidence," Development and Comp Systems 0511021, EconWPA. [Downloadable!]
    Other versions:
  7. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2006. "Modelling poverty by not modelling poverty: An application of a simultaneous hazards approach to the UK," CASE Papers /106, Centre for Analysis of Social Exclusion, LSE. [Downloadable!]
    Other versions:
  8. Carlos Gradín & Olga Cantó, 2009. "Why are child poverty rates so persistently high in Spain?," Working Papers 123, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
  9. Marjan, MAES, 2008. "Poverty persistence among Belgian elderly in the transition from work to retirement : an empirical analysis," Discussion Papers (ECON - Département des Sciences Economiques) 2008042, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  10. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," Journal of Economic Inequality, Springer, vol. 5(1), pages 53-72, April. [Downloadable!] (restricted)
    Other versions:
  11. Brenda Gannon, 2005. "A dynamic analysis of disability and labour force participation in Ireland 1995-2000," Health Economics, John Wiley & Sons, Ltd., vol. 14(9), pages 925-938. [Downloadable!]
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