The dynamics of welfare entry and exit among natives and immigrants
AbstractThis paper uses panel data from the German Socio-Economic Panel (SOEP) to analyze welfare entry and exit among natives and immigrants after a substantial reform of the welfare system (``Hartz reform''). Using results from dynamic multinomial logit models, we calculate transition matrices between three mutually exclusive labor market states (inactivity, employment, welfare receipt) for five groups: natives, all immigrants, EU citizens, non-EU citizens, and immigrants with German citizenship. The empirical results show that temporal persistence in welfare participation can for the most part be explained by observed and unobserved characteristics. In general, immigrants appear to have a higher risk of welfare entry and a lower probability of welfare exit compared to natives. We find no evidence of a failure of the welfare system in the sense that it creates a welfare trap. Instead, the immigrant-native gap in welfare dependence arises from an insufficient labor market integration and an increased risk of unemployment for immigrants. The analysis identifies non-EU citizens, who are mostly of Turkish origin or citizens of the successor states of former Yugoslavia, as a group with particularly poor labor market prospects: they have the lowest employment stability, the highest persistence in welfare participation, the highest welfare entry rate, and the lowest welfare exit rate. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis with number 49162.
Date of creation: 2011
Date of revision:
welfare trap; Hartz Reform; welfare dependence; unemployment benefit II; immigration;
Find related papers by JEL classification:
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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