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The Dynamics of Immigrant Welfare and Labor Market Behavior

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Author Info
Hansen, Jörgen (Concordia University, CEPR and IZA, Bonn)
Lofstrom, Magnus () (Concordia University, CEPR and IZA, Bonn)

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Abstract

This paper analyzes transitions into and out of 3 different labor market states, social assistance, unemployment and employment. We estimate a dynamic multinomial logit model, controlling for endogenous initial condition and unobserved heterogeneity, using a large representative Swedish panel data set, LINDA, for the years 1990 to 1996. The unadjusted data indicates that immigrants are more likely to receive both social assistance and unemployment compensation than natives. Immigrants are less likely to remain employed in consecutive years than natives and are more likely to stay on welfare and to receive unemployment insurance in a year, given participation in the previous year. The empirical results suggest that refugee immigrants display a greater degree of "structural" state dependence than natives. Further, immigrants from non-refugee countries display a similar degree of "structural" state dependence as natives. The high welfare participation rates among refugee immigrants seem to be due to the existence of a "welfare trap", while participation among natives and non-refugee immigrants is largely due to permanent unobserved characteristics. These results suggest that welfare reforms will have differential effects on refugee immigrants and natives.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 360.

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Length: 45 pages
Date of creation: Sep 2001
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Handle: RePEc:iza:izadps:dp360

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Related research
Keywords: Welfare; labor market behavior; transition; immigration; state dependence;

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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
J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities and Races; Non-labor Discrimination
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

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References listed on IDEAS
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. Edin, Per-Anders & LaLonde, Robert J. & Åslund, Olof, 2000. "Emigration of Immigrants and Measures of Immigrant Assimilation: Evidence from Sweden," Working Paper Series 2000:13, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  3. Blank, Rebecca M., 1989. "Analyzing the length of welfare spells," Journal of Public Economics, Elsevier, vol. 39(3), pages 245-273, August. [Downloadable!] (restricted)
  4. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier. [Downloadable!] (restricted)
    Other versions:
  5. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  6. Jörgen Hansen & Magnus Lofstrom, 2006. "Immigrant-Native Differences in Welfare Participation: The Role of Entry and Exit Rates," IZA Discussion Papers 2261, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  8. Jörgen Hansen & Magnus Lofstrom, 1999. "Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate Into or Out-of Welfare," IZA Discussion Papers 100, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470. [Downloadable!]
  10. Bauer, Thomas K. & Lofstrom, Magnus & Zimmermann, Klaus F., 2000. "Immigration Policy, Assimilation of Immigrants and Natives' Sentiments towards Immigrants: Evidence from 12 OECD-Countries," IZA Discussion Papers 187, Institute for the Study of Labor (IZA). [Downloadable!]
  11. O'Neill, June A & Bassi, Laurie J & Wolf, Douglas A, 1987. "The Duration of Welfare Spells," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 241-48, May. [Downloadable!] (restricted)
  12. Hilary Williamson Hoynes, 2000. "Local Labor Markets And Welfare Spells: Do Demand Conditions Matter?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 351-368, August. [Downloadable!] (restricted)
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  13. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May. [Downloadable!] (restricted)
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  14. Plant, Mark W, 1984. "An Empirical Analysis of Welfare Dependence," American Economic Review, American Economic Association, vol. 74(4), pages 673-84, September. [Downloadable!] (restricted)
  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.
  16. Enberg, John & Gottschalk, Peter & Wolf, Douglas, 1990. "A random-effects logit model of work-welfare transitions," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 63-75. [Downloadable!] (restricted)
  17. Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 575-604, May. [Downloadable!] (restricted)
    Other versions:
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. Åslund, Olof & Östh, John & Zenou, Yves, 2006. "How Important is Access to Jobs? Old Question - Improved Answer," Working Paper Series 661, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  2. Jörgen Hansen & Magnus Lofstrom, 2006. "Immigrant-Native Differences in Welfare Participation: The Role of Entry and Exit Rates," IZA Discussion Papers 2261, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Jörgen Hansen & Magnus Lofstrom & Xuelin Zhang, 2006. "State Dependence in Canadian Welfare Participation," IZA Discussion Papers 2266, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Marie-Laure Michaud, 2004. "Welfare and the Labour Market in the EU," Occasional Papers 07, European Network of Economic Policy Research Institutes. [Downloadable!]
  5. Leif Husted & Eskil Heinesen & Signe Andersen, 2009. "Labour market integration of immigrants: estimating local authority effects," Journal of Population Economics, Springer, vol. 22(4), pages 909-939, October. [Downloadable!] (restricted)
  6. David E. Wildasin, 2005. "Global Competition for Mobile Resources: Implications for Equity, Efficiency, and Political Economy," Working Papers 2005-08, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
    Other versions:
  7. Åslund, Olof & Rooth, Dan-Olof, 2003. "Do when and where matter? Initial labor market conditions and immigrant earnings," Working Paper Series 2003:7, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  8. Richter, Wolfram F., 2002. "Social Security and Taxation of Labour Subject to Subsidiarity and Freedom of Movement," IZA Discussion Papers 490, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Jorgen Hansen & Roger Wahlberg, 2009. "Poverty and its persistence: a comparison of natives and immigrants in Sweden," Review of Economics of the Household, Springer, vol. 7(2), pages 105-132, June. [Downloadable!] (restricted)
  10. Hansen, orgen & Wahlberg, Roger, 2004. "Poverty Persistence in Sweden," IZA Discussion Papers 1209, Institute for the Study of Labor (IZA). [Downloadable!]
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