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The Dynamics of Social Assistance Benefit Receipt in Britain

  • Cappellari, Lorenzo

    ()

    (Università Cattolica del Sacro Cuore)

  • Jenkins, Stephen P.

    ()

    (London School of Economics)

We analyze the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate, rather than by the SA exit rate (which actually declined too). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA entry and exit probabilities applied to British Household Panel Survey data. The model estimates and accompanying counterfactual simulations highlight the importance of two factors – the decline in the unemployment rate over the period, and other changes in the socioeconomic environment including two reforms to the income maintenance system in the 1990s. The results also reveal a substantial heterogeneity in SA annual transition rates.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4457.

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Length: 37 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4457
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  1. Paul Gregg & Susan Harkness & Sarah Smith, 2009. "Welfare Reform and Lone Parents in the UK," Economic Journal, Royal Economic Society, vol. 119(535), pages F38-F65, 02.
  2. David C. Ribar, 2005. "Transitions from Welfare and the Employment Prospects of Low-Skill Workers," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 514-533, January.
  3. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "The dynamics of social assistance receipt: measurement and modelling issues, with an application to Britain," Working Papers 101, ECINEQ, Society for the Study of Economic Inequality.
  4. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
  5. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
  7. Stephen P. Jenkins, 2000. "Modelling household income dynamics," Journal of Population Economics, Springer, vol. 13(4), pages 529-567.
  8. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186.
  9. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  10. Steven Haider & Jacob Alex Klerman, 2003. "Dynamic Properties of the Welfare Caseload," Working Papers 03-08, RAND Corporation Publications Department.
  11. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
  12. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
  13. Manning, Alan, 2009. "You can't always get what you want: The impact of the UK Jobseeker's Allowance," Labour Economics, Elsevier, vol. 16(3), pages 239-250, June.
  14. Blundell, Richard, 2001. "Welfare Reform for Low Income Workers," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 189-214, April.
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