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Understanding the drivers of low income transitions in Luxembourg

Listed author(s):
  • FUSCO Alessio
  • ISLAM Nizamul

We analyse the determinants of poverty transitions, defined as movements across a low income threshold, in Luxembourg. Data used are those from the Luxembourg socioeconomic panel ?Liewen zu Lëtzebuerg? (PSELL3) running from 2003 to 2009. Using an endogenous switching first-order Markov model, we control for potential endogeneity to low income transitions due to both initial condition and non random attrition. We find that employment protects from both remaining poor and entering poverty. In addition, attrition and initial low income are found to be endogenous processes with respect to low income transitions. Finally, genuine state dependence accounts for a substantial level of aggregate state dependence.

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Paper provided by LISER in its series LISER Working Paper Series with number 2012-31.

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Length: 40 pages
Date of creation: Jul 2012
Handle: RePEc:irs:cepswp:2012-31
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  1. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
  2. Martin Biewen, 2009. "Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1095-1116.
  3. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2006. "Modelling poverty by not modelling poverty: an application of a simultaneous hazards approach to the UK," LSE Research Online Documents on Economics 6243, London School of Economics and Political Science, LSE Library.
  4. Lorenzo Cappellari & Stephen P. Jemkins, 2002. "Who Stays Poor? Who Becomes Poor? Evidence from the British Household Panel Survey," Economic Journal, Royal Economic Society, vol. 112(478), pages 60-67, March.
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  6. Simon Burgess & Carol Propper & Matt Dickson, 2006. "The analysis of poverty data with endogenous transitions," Fiscal Studies, Institute for Fiscal Studies, vol. 27(1), pages 75-98, March.
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  8. Islam, Nizamul & Shimeles, Abebe, 2007. "Poverty dynamics in Ethiopia: state dependence," Working Papers in Economics 260, University of Gothenburg, Department of Economics.
  9. Ann Huff Stevens, 1995. "Climbing Out of Poverty, Falling Back In: Measuring the Persistence of Poverty over Multiple Spells," NBER Working Papers 5390, National Bureau of Economic Research, Inc.
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  11. Van Kerm, Philippe, 2004. "Une évaluation économétrique des flux vers et hors de la pauvreté en Belgique," IRISS Working Paper Series 2004-04, IRISS at CEPS/INSTEAD.
  12. Bertola, G., 1998. "Marcroeconomics of Distribution and Growth," Economics Working Papers eco98/39, European University Institute.
  13. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 53-72, April.
  14. Mary Jo Bane & David T. Ellwood, 1986. "Slipping into and out of Poverty: The Dynamics of Spells," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 1-23.
  15. Simon Burgess & Carol Propper, 1998. "An Economic Model of Household Income Dynamics, with an Application to Poverty Dynamics among American Women," CASE Papers case09, Centre for Analysis of Social Exclusion, LSE.
  16. Duncan, Greg J & Gustafsson, Bjorn & Hauser, Richard & Schmauss, Gunther & Messinger, Hans & Muffels, Ruud & Nolan, Brian, 1993. "Poverty Dynamics in Eight Countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(3), pages 215-234.
  17. FAYE Ousmane & ISLAM Nizamul & ZULU Eliya, 2011. "Poverty dynamics in Nairobi's slums: testing for true state dependence and heterogeneity effects," LISER Working Paper Series 2011-56, LISER.
  18. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, December.
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