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Modelling Low Income Transitions

  • Cappellari, Lorenzo

    ()

    (Università Cattolica del Sacro Cuore)

  • Jenkins, Stephen P.

    ()

    (London School of Economics)

We examine the determinants of low income transitions using first-order Markov models that control for initial conditions effects (those found to be poor in the base year may be a nonrandom sample) and for attrition (panel retention may also be non-random). Our econometric model is a form of endogeneous switching regression, and is fitted using simulated maximum likelihood methods. The estimates, derived from British panel data for the 1990s, indicate that there is substantial genuine state dependence in poverty. We also provide estimates of low income transition rates and lengths of poverty and non-poverty spells for persons of different types.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 504.

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Length: 45 pages
Date of creation: May 2002
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2004, 19 (5), 593-610
Handle: RePEc:iza:izadps:dp504
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  1. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling low income transitions," ISER Working Paper Series 2002-08, Institute for Social and Economic Research.
  2. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
  3. Francesco Devicienti, 2001. "Estimating Poverty Persistence in Britain," LABORatorio R. Revelli Working Papers Series 1, LABORatorio R. Revelli, Centre for Employment Studies.
  4. Ann Huff Stevens, 1999. "Climbing out of Poverty, Falling Back in: Measuring the Persistence of Poverty Over Multiple Spells," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 557-588.
  5. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
  6. Stewart, M.B. & Swaffield, J.K., 1997. "Low Pay Dynamics and Transition Probabilities," The Warwick Economics Research Paper Series (TWERPS) 495, University of Warwick, Department of Economics.
  7. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  8. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  9. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  10. Gerard J. van den Berg & Maarten Lindeboom, 1998. "Attrition in Panel Survey Data and the Estimation of Multi-State Labor Market Models," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 458-478.
  11. Stephen P. Jenkins, 2000. "Modelling household income dynamics," Journal of Population Economics, Springer, vol. 13(4), pages 529-567.
  12. Sloane, P J & Theodossiou, I, 1996. "Earnings Mobility, Family Income and Low Pay," Economic Journal, Royal Economic Society, vol. 106(436), pages 657-66, May.
  13. Sarah Jarvis & Stephen P. Jenkins, 1997. "Marital Splits and Income Changes: Evidence for Britain," Papers iopeps97/26, Innocenti Occasional Papers, Economic Policy Series.
  14. Cappellari, Lorenzo, 2001. "Earnings mobility among Italian low paid workers," ISER Working Paper Series 2001-13, Institute for Social and Economic Research.
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