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Family welfare cultures

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  • Gordon B. Dahl
  • Andreas Ravndal Kostøl
  • Magne Mogstad

    ()
    (Statistics Norway)

Abstract

Strong intergenerational correlations in various types of welfare use have fueled a long-standing debate over whether welfare receipt in one generation causes welfare participation in the next generation. Some claim a causal relationship in welfare receipt across generations has created a culture in which welfare use reinforces itself through the family. Others argue the determinants of poverty or poor health are correlated across generations, so that children's welfare participation is associated with, but not caused by, parental welfare receipt. However, there is little empirical evidence to sort out these claims. In this paper, we investigate the existence and importance of family welfare cultures in the context of Norway's disability insurance (DI) system. To overcome the challenge of correlated unobservables across generations, we take advantage of random assignment of judges to DI applicants whose cases are initially denied. Some appeal judges are systematically more lenient, which leads to random variation in the probability a parent will be allowed DI. Using this exogenous variation, we find strong evidence that welfare receipt in one generation causes welfare participation in the next generation: when a parent is allowed DI, their adult child's participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after ten years. While these findings are specific to our setting, they serve to highlight that welfare reforms can have longlasting effects on program participation, since any original effect on the current generation could be reinforced by changing the participation behavior of their children as well. The detailed nature of our data allows us to compare the intergenerational transmission with spillover effects in other networks and to explore mechanisms. Our findings point to a special link between parents and their children, with little impact due to close neighbors' DI participation. We find suggestive evidence that what may change as a result of a parent being allowed DI is their children's beliefs about the efficacy of trying to get on to the DI program or their attitudes about DI participation and its stigma.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 782.

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Date of creation: Jun 2014
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Handle: RePEc:ssb:dispap:782

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Keywords: Intergenerational welfare transmission; welfare cultures; disability insurance;

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References

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Cited by:
  1. Venke Furre Haaland & Mari Rege & Kjetil Telle & Mark Votruba, 2014. "The intergenerational transfer of the employment gender gap," Discussion Papers, Research Department of Statistics Norway 767, Research Department of Statistics Norway.
  2. Venke Furre Haaland & Mari Rege & Kjetil Telle & Mark Votruba, 2013. "The Intergenerational Transfer of the Gender Gap in Labor Force Participation," CESifo Working Paper Series 4489, CESifo Group Munich.
  3. Chaisemartin, Clément de, 2014. "Tolerating defiance? Local average treatment effects without monotonicity," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 197, Competitive Advantage in the Global Economy (CAGE).
  4. Løken, Katrine V. & Lommerud, Kjell Erik & Reiso, Katrine Holm, 2014. "Single Mothers and their children: Evaluating a work-encouraging welfare reform," Working Papers in Economics 04/14, University of Bergen, Department of Economics.

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