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The Dynamics of Social Assistance Benefit Receipt in Britain

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  • Cappellari, Lorenzo

    ()
    (Università Cattolica del Sacro Cuore)

  • Jenkins, Stephen P.

    ()
    (London School of Economics)

Abstract

We analyze the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate, rather than by the SA exit rate (which actually declined too). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA entry and exit probabilities applied to British Household Panel Survey data. The model estimates and accompanying counterfactual simulations highlight the importance of two factors – the decline in the unemployment rate over the period, and other changes in the socioeconomic environment including two reforms to the income maintenance system in the 1990s. The results also reveal a substantial heterogeneity in SA annual transition rates.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4457.

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Length: 37 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4457

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Keywords: social assistance; income dynamics; benefits; dynamic random effects probit; welfare;

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References

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  1. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain," Discussion Papers of DIW Berlin 828, DIW Berlin, German Institute for Economic Research.
  2. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
  3. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  4. Blundell, Richard, 2001. "Welfare Reform for Low Income Workers," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 189-214, April.
  5. Haider, Steven J. & Klerman, Jacob Alex, 2005. "Dynamic properties of the welfare caseload," Labour Economics, Elsevier, vol. 12(5), pages 629-648, October.
  6. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
  7. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
  8. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling low income transitions," ISER Working Paper Series 2002-08, Institute for Social and Economic Research.
  9. David C. Ribar, 2005. "Transitions from Welfare and the Employment Prospects of Low-Skill Workers," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 514-533, January.
  10. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
  11. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  12. Manning, Alan, 2009. "You can't always get what you want: The impact of the UK Jobseeker's Allowance," Labour Economics, Elsevier, vol. 16(3), pages 239-250, June.
  13. Paul Gregg & Susan Harkness & Sarah Smith, 2007. "Welfare Reform and Lone Parents in the UK," The Centre for Market and Public Organisation 07/182, Department of Economics, University of Bristol, UK.
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Cited by:
  1. Daniela Andrén & Thomas Andrén, 2012. "Never give up? The persistence of welfare participation in Sweden," Discussion Papers 5, Central European Labour Studies Institute (CELSI).
  2. Drinkwater, Stephen & Robinson, Catherine, 2011. "Welfare Participation by Immigrants in the UK," IZA Discussion Papers 6144, Institute for the Study of Labor (IZA).
  3. Regina T. Riphahn & Christoph Wunder, 2013. "State Dependence in Welfare Receipt: Transitions Before and After a Reform," CESifo Working Paper Series 4485, CESifo Group Munich.
  4. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance," Working Papers 2013:7, Örebro University, School of Business.
  5. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2014. "Time aggregation and state dependence in welfare receipt," Discussion Papers 771, Research Department of Statistics Norway.
  6. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance in the 1990s: What happened to those who were single before the recession?," Working Papers 2013:10, Örebro University, School of Business.
  7. Peter R. Mueser & Colleen M. Heflin, 2013. "Aid to Jobless Workers in Florida in the Face of the Great Recession: The Interaction of Unemployment Insurance and the Supplemental Nutritional Assistance Program," Working Papers 1318, Department of Economics, University of Missouri.
  8. Nicolas Hérault & Guyonne Kalb & Rezida Zakirova, 2011. "Dynamics of Household Joblessness: Evidence from Australian Micro-Data 2001–2007," Melbourne Institute Working Paper Series wp2011n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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