Estimating Poverty Persistence in Britain

This paper uses longitudinal data from the BHPS, waves 1-8, to document low-income dynamics and persistence for individuals living in Britain in the 1990s. Poverty exit and re-entry rates are estimated and the resulting distribution of time spent in poverty is calculated, both in single and in multiple-spells frameworks. Following Stevens (1999), I estimate a multiple-spell model of transitions in and out of poverty, controlling for observed and correlated unobserved individual heterogeneity and for a potential initial condition problem. Both hazard rate and components-of-variance models are used to predict the number of years in poverty for various subgroups of the populations.