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True State Dependence In Monthly Welfare Participation:A Nonexperimental Analysis

Author

Listed:
  • Hilary W. Hoynes
  • Kenneth Y. Chay
  • Dean Hyslop

    (Department of Economics, University of California Davis)

Abstract

This paper provides an empirical evaluation of true state dependence in welfare participationusing unique administrative data from California that is measured at the monthly frequency,which coincides with the welfare eligibility period and so is free of time aggregation bias. Theanalysis uses first- and second-order dynamic conditional logit models that non-parametricallycontrol for permanent unobserved heterogeneity to test for state dependence in welfare behavior.The second-order model also absorbs individual-specific first-order Markov chains, and providesa more robust test for state dependence in high frequency data. The results using the first-ordermodel show substantial first-order state dependence in monthly welfare participation. Absorbingheterogeneous first-order effects, the hypothesis of no second-order state dependence is alsoeasily rejected. This suggests that past welfare participation predicts future participation, givenunrestricted effects of both the present state and unobserved heterogeneity, and providessubstantive evidence of duration dependence at the individual level.

Suggested Citation

  • Hilary W. Hoynes & Kenneth Y. Chay & Dean Hyslop, 2004. "True State Dependence In Monthly Welfare Participation:A Nonexperimental Analysis," Working Papers 2, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:2
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. D'Addio, Anna Cristina & Honoré, Bo E., 2010. "Duration Dependence and Timevarying Variables in Discrete Time Duration Models," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 30(2), December.
    2. Kristin F. Butcher & Robert J. LaLonde, 2006. "Female offenders use of social welfare programs before and after jail and prison: does prison cause welfare dependency?," Working Paper Series WP-06-13, Federal Reserve Bank of Chicago.
    3. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2006. "What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments," American Economic Review, American Economic Association, vol. 96(4), pages 988-1012, September.
    4. David Blau, 2003. "Child Care Subsidy Programs," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 443-516, National Bureau of Economic Research, Inc.
    5. 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.
    6. 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.
    7. 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.
    8. Wunder, Christoph & Riphahn, Regina, 2013. "Welfare transitions before and after reforms of the German welfare system," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79715, Verein für Socialpolitik / German Economic Association.
    9. Timothy J. Halliday, 2008. "Heterogeneity, state dependence and health," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 499-516, November.
    10. Atasoy, Sibel & Mills, Bradford F. & Parmeter, Christopher F., 2010. "The Dynamics of Food Stamp Program Participation: A Lagged Dependent Variable Approach," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60963, Agricultural and Applied Economics Association.
    11. Yi-Ping Tseng & Ha Vu & Roger Wilkins, 2006. "Dynamic Properties of Income Support Receipt in Australia," Melbourne Institute Working Paper Series wp2006n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    12. Andrén, Daniela & Andrén, Thomas, 2013. "State dependence in Swedish social assistance," Working Papers 2013:7, Örebro University, School of Business.
    13. Mazzolari, Francesca & Ragusa, Giuseppe, 2012. "Time Limits: The Effects on Welfare Use and Other Consumption-Smoothing Mechanisms," IZA Discussion Papers 6993, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Binary response panel data; state dependence; unobserved heterogeneity; initialconditions; conditional logit models;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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