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The Dynamics of Social Assistance Benefit Receipt in Britain

In: Safety Nets and Benefit Dependence

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  • Lorenzo Cappellari
  • Stephen P. Jenkins

Abstract

Abstract We analyse 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 also declined). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA receipt probabilities applied to British Household Panel Survey data. We show how the model may be used to derive year-by-year predictions of aggregate SA entry, exit and receipt rates. The analysis highlights the importance of the decline in the unemployment rate over the period and other changes in the socio-economic environment including two reforms to the income maintenance system in the 1990s and also illustrates the effects of self-selection (‘creaming’) on observed and unobserved characteristics.

Suggested Citation

  • Lorenzo Cappellari & Stephen P. Jenkins, 2014. "The Dynamics of Social Assistance Benefit Receipt in Britain," Research in Labor Economics,in: Safety Nets and Benefit Dependence, volume 39, pages 41-79 Emerald Publishing Ltd.
  • Handle: RePEc:eme:rleczz:s0147-912120140000039000
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    References listed on IDEAS

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    1. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
    2. Cappellari, Lorenzo & Jenkins, Stephen P., 2008. "The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain," IZA Discussion Papers 3765, Institute for the Study of Labor (IZA).
    3. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    4. Mark B. Stewart, 2007. "The interrelated dynamics of unemployment and low-wage employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 511-531.
    5. 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.
    6. 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.
    7. Paul Gregg & Susan Harkness & Sarah Smith, 2009. "Welfare Reform and Lone Parents in the UK," Economic Journal, Royal Economic Society, vol. 119(535), pages 38-65, February.
    8. 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.
    9. Stephen P. Jenkins, 2000. "Modelling household income dynamics," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 529-567.
    10. 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.
    11. 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.
    12. Haider, Steven J. & Klerman, Jacob Alex, 2005. "Dynamic properties of the welfare caseload," Labour Economics, Elsevier, vol. 12(5), pages 629-648, October.
    13. 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).
    14. Blundell, Richard, 2001. "Welfare Reform for Low Income Workers," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 189-214, April.
    15. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "The Dynamics of Social Assistance Receipt: Measurement and Modelling Issues, with an Application to Britain," OECD Social, Employment and Migration Working Papers 67, OECD Publishing.
    16. 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.
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    Citations

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    Cited by:

    1. Thomas Andrén & Daniela Andrén, 2013. "Never give up? The persistence of welfare participation in Sweden," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    2. Wunder, Christoph & Riphahn, Regina, 2013. "Welfare transitions before and after reforms of the German welfare system," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79715, Verein für Socialpolitik / German Economic Association.
    3. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2017. "Time Aggregation and State Dependence in Welfare Receipt," Economic Journal, Royal Economic Society, vol. 127(604), pages 1833-1873, September.
    4. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    5. 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.
    6. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance," Working Papers 2013:7, Örebro University, School of Business.
    7. Regina T. Riphahn & Christoph Wunder, 2016. "State dependence in welfare receipt: transitions before and after a reform," Empirical Economics, Springer, vol. 50(4), pages 1303-1329, June.
    8. repec:spr:jqecon:v:15:y:2017:i:2:d:10.1007_s40953-016-0056-1 is not listed on IDEAS
    9. Herwig Immervoll & Stephen P. Jenkins & Sebastian Königs, 2015. "Are Recipients of Social Assistance 'Benefit Dependent'?: Concepts, Measurement and Results for Selected Countries," OECD Social, Employment and Migration Working Papers 162, OECD Publishing.
    10. 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.
    11. Stephen Drinkwater & Catherine Robinson, 2013. "Welfare participation by immigrants in the UK," International Journal of Manpower, Emerald Group Publishing, vol. 34(2), pages 100-112, May.
    12. Sebastian Königs, 2014. "The Dynamics of Social Assistance Benefit Receipt in Germany: State Dependence before and after the 'Hartz Reforms'," SOEPpapers on Multidisciplinary Panel Data Research 628, DIW Berlin, The German Socio-Economic Panel (SOEP).
    13. Sebastian Königs, 2015. "Micro-level dynamics of social assistance receipt. Evidence from 4 European countries," Discussion Papers 797, Statistics Norway, Research Department.
    14. 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.

    More about this item

    Keywords

    Social assistance benefits; welfare benefits; panel data; dynamic self-selection; dynamic random effects probit; I38; C23; C53;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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