Education, Social Assistance And Employment Dynamics: A Panel Data Approach

In recent years there have been increases in social transfer payments to provide disadvantaged citizens a minimum of resources for them to have a decent standard of living. Existing literature agrees that social assistance programs are generally successful in poverty mitigation efforts. However, social transfer programs may also have unintended consequences such as the reduction in the labour force participation rates. When social assistance payment is made, an economic agent may prefer utility-generating activities rather than wage labour. Thus, economic agent may reduce the working hours and may opt for domestic production or leisure. Therefore, it is plausible that labour supply and social assistance participation decisions may be made simultaneously in order to maximize utility subject to a budget constraint. The aim of this study is to explore the factors associated with the preference for utility-generating activities rather than wage labour by employing microeconometric methods, which will result in policy recommendations for social assistance and employment policies. The issue is investigated by employing a bivariate panel probit model and utilizing Income and Living Conditions panel data belonging to 2010-2013. In addition to exploring the association of social assistance program participation and employment decision, impact of education on both variables has also been explored. Empirical results indicate that the more one works, the less one participates in social transfer program, and vice versa. Additionally, age, gender, household type and composition impact decision making process of individuals.