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Does Benefit Receipt Affect Future Income? An Econometric Explanation

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  • Dean Hyslop

    ()
    (Policy Coordination and Development, The Treasury and Department of Economics, UCLA)

Abstract

This paper provides an econometric analysis of the effects of receiving welfare benefits on individuals’ future income, using longitudinal administrative data on individual incomes. After controlling for heterogeneous differences in individual incomes, spurious effects of contemporaneous benefit receipt and possible endogeneity with incomes, there is no systematic evidence of a positive or negative effect of benefit receipt on incomes. The results are generally imprecisely estimated and sensitive to the choice of specification. Also, a simple first-order specification with unobserved heterogeneity provides a reasonable characterisation of individual income dynamics, although formal statistical tests tend to reject this specification as being too parsimonious.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2000/00-14/twp00-14.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 00/14.

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Length: 20 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:nzt:nztwps:00/14

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  1. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, Econometric Society, vol. 67(6), pages 1255-1294, November.
  2. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, National Bureau of Economic Research, Inc, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  3. Plant, Mark W, 1984. "An Empirical Analysis of Welfare Dependence," American Economic Review, American Economic Association, American Economic Association, vol. 74(4), pages 673-84, September.
  4. Creedy, J, 1996. "Income Dynamics Over the Life Cycle: New Evidence for New Zealand," Department of Economics - Working Papers Series, The University of Melbourne 511, The University of Melbourne.
  5. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
  6. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(4), pages 665-88, August.
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  1. repec:ese:iserwp:2009-18 is not listed on IDEAS

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