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State Dependence in Welfare Benefits in a Non-Welfare Context

Author

Listed:
  • Ayhan, Sinem H.

    () (University of Münster)

  • Pelek, Selin

    () (Galatasaray University)

Abstract

This study contributes to the ongoing debate about welfare dependency centered on the western societies through an empirical analysis, within the context of a developing country. It examines state dependence in social assistance benefit receipt using longitudinal data from Turkey, where benefit receipt and persistence rates have witnessed a significant increase since the last decade. Identification is achieved by dynamic random effects probit models, controlling for unobserved heterogeneity and endogenous initial conditions. Particularly, Wooldridge's (2005) estimator and its extensions are applied for achieving consistent and correct estimates of state dependence. In order to check for sensitivity, the results are compared with the results from Heckman's (1981) reduced form approach. Both estimators enable us to deal with the potential bias due to the short panel length. It is found that the benefit receipt of the last year increases the likelihood of benefit receipt in the current year by 17 to 22 percentage points. This evidence suggests that state dependence in social assistance might also be a relevant phenomenon for developing countries.

Suggested Citation

  • Ayhan, Sinem H. & Pelek, Selin, 2015. "State Dependence in Welfare Benefits in a Non-Welfare Context," IZA Discussion Papers 9551, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9551
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    References listed on IDEAS

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    1. Eric V. Edmonds & Norbert Schady, 2012. "Poverty Alleviation and Child Labor," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 100-124, November.
    2. Rabe-Hesketh, Sophia & Skrondal, Anders, 2013. "Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem," Economics Letters, Elsevier, vol. 120(2), pages 346-349.
    3. 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).
    4. Thomas Andrén & Daniela Andrén, 2013. "Never give up? The persistence of welfare participation in Sweden," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    5. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
    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. Marco Manacorda & Edward Miguel & Andrea Vigorito, 2011. "Government Transfers and Political Support," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 1-28, July.
    8. Sarah Baird & Craig McIntosh & Berk Özler, 2011. "Cash or Condition? Evidence from a Cash Transfer Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1709-1753.
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    More about this item

    Keywords

    social assistance benefits; state dependence; endogenous initial conditions; dynamic random effects models;

    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
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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