Jörgen Hansen () (Concordia University, CEPR, CIRANO, CIREQ and IZA Bonn) Magnus Lofstrom () (University of Texas at Dallas and IZA Bonn) Xuelin Zhang () (Statistics Canada)
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This paper analyzes transitions into and out-of Social Assistance in Canada. We estimate a dynamic Probit model, controlling for endogenous initial conditions and unobserved heterogeneity, using longitudinal data extracted from the Survey of Labour and Income Dynamics (SLID) for the years 1993-2000. The data indicates that there are substantial provincial differences in social assistance participation. The empirical results indicate that a “welfare trap” does exist in Canada, but the extent of it varies across provinces. The results also suggest that there is a link between provincial variations in structural and spurious state dependence and regional differences in welfare generosity. In particular, the existence of structural state dependence, or a “welfare trap”, appears to be more likely in provinces with relatively high benefit levels. One implication of this result is that a change in the welfare benefit structure is not likely to lower participation as significantly among less generous provinces as more generous ones.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
2266.
Find related papers by JEL classification: I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
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