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State Dependence in Canadian Welfare Participation

Author

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  • Hansen, Jörgen

    () (Concordia University)

  • Lofstrom, Magnus

    () (Public Policy Institute of California)

  • Zhang, Xuelin

    () (Statistics Canada)

Abstract

This paper analyzes transitions into and out-of Social Assistance in Canada. We estimate a dynamic Probit model, controlling for endogenous initial conditions and unobserved heterogeneity, using longitudinal data extracted from the Survey of Labour and Income Dynamics (SLID) for the years 1993-2000. The data indicates that there are substantial provincial differences in social assistance participation. The empirical results indicate that a “welfare trap” does exist in Canada, but the extent of it varies across provinces. The results also suggest that there is a link between provincial variations in structural and spurious state dependence and regional differences in welfare generosity. In particular, the existence of structural state dependence, or a “welfare trap”, appears to be more likely in provinces with relatively high benefit levels. One implication of this result is that a change in the welfare benefit structure is not likely to lower participation as significantly among less generous provinces as more generous ones.

Suggested Citation

  • Hansen, Jörgen & Lofstrom, Magnus & Zhang, Xuelin, 2006. "State Dependence in Canadian Welfare Participation," IZA Discussion Papers 2266, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2266
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Clark, Ken & Kanellopoulos, Nikolaos C., 2013. "Low pay persistence in Europe," Labour Economics, Elsevier, vol. 23(C), pages 122-134.
    4. 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.
    5. Lorenzo Cappellari & Richard Dorsett & Getinet Haile, 2010. "State dependence and unobserved heterogeneity in the employment transitions of the over-50s," Empirical Economics, Springer, vol. 38(3), pages 523-554, June.
    6. 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.
    7. 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).
    8. Nisar Ahmad & Rayhaneh Esmaeilzadeh, 2009. "Immigrant-Native Differences in Earnings Mobility Processes: Evidence from Canadian and Danish Data," Economics Working Papers 2009-13, Department of Economics and Business Economics, Aarhus University.
    9. 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).
    10. Aldashev, Alisher & Fitzenberger, Bernd, 2009. "Der Zugang von Arbeitnehmern in den Bezug von Arbeitslosengeld II," ZEW Discussion Papers 09-063, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    welfare; state dependence; unobserved heterogeneity; initial conditions; transition; Canada;

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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