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The dynamics of welfare entry and exit among natives and immigrants

  • Wunder, Christoph
  • Riphahn, Regina T.

This paper uses panel data from the German Socio-Economic Panel (SOEP) to analyze welfare entry and exit among natives and immigrants after a substantial reform of the welfare system (``Hartz reform''). Using results from dynamic multinomial logit models, we calculate transition matrices between three mutually exclusive labor market states (inactivity, employment, welfare receipt) for five groups: natives, all immigrants, EU citizens, non-EU citizens, and immigrants with German citizenship. The empirical results show that temporal persistence in welfare participation can for the most part be explained by observed and unobserved characteristics. In general, immigrants appear to have a higher risk of welfare entry and a lower probability of welfare exit compared to natives. We find no evidence of a failure of the welfare system in the sense that it creates a welfare trap. Instead, the immigrant-native gap in welfare dependence arises from an insufficient labor market integration and an increased risk of unemployment for immigrants. The analysis identifies non-EU citizens, who are mostly of Turkish origin or citizens of the successor states of former Yugoslavia, as a group with particularly poor labor market prospects: they have the lowest employment stability, the highest persistence in welfare participation, the highest welfare entry rate, and the lowest welfare exit rate.

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File URL: https://econstor.eu/bitstream/10419/49162/1/VfS_2011_pid_897.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis with number 49162.

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Date of creation: 2011
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Handle: RePEc:zbw:vfsc11:49162
Contact details of provider: Web page: http://www.socialpolitik.org/
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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. Basilio, Leilanie & Bauer, Thomas K., 2010. "Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany," IZA Discussion Papers 4716, Institute for the Study of Labor (IZA).
  3. 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.
  4. Barrett, Alan & McCarthy, Yvonne, 2008. "Immigrants and Welfare Programmes: Exploring the Interactions between Immigrant Characteristics, Immigrant Welfare Dependence and Welfare Policy," IZA Discussion Papers 3494, Institute for the Study of Labor (IZA).
  5. Bratsberg, Bernt & Raaum, Oddbjørn & Røed, Knut, 2007. "When Minority Labor Migrants Meet the Welfare State," IZA Discussion Papers 2872, Institute for the Study of Labor (IZA).
  6. Akay, Alpaslan, 2009. "The Wooldridge Method for the Initial Values Problem Is Simple: What About Performance?," IZA Discussion Papers 3943, Institute for the Study of Labor (IZA).
  7. Caliendo, Marco & Uhlendorff, Arne, 2008. "Self-Employment Dynamics, State Dependence and Cross-Mobility Patterns," IZA Discussion Papers 3900, Institute for the Study of Labor (IZA).
  8. Alisher Aldashev & Johannes Gernandt & Stephan L. Thomsen, 2008. "The Immigrant Wage Gap in Germany," FEMM Working Papers 08019, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  9. Cappellari, Lorenzo & Jenkins, Stephen P., 2004. "Modelling low pay transition probabilities, accounting for panel attrition, non-response, and initial conditions," ISER Working Paper Series 2004-08, Institute for Social and Economic Research.
  10. Blank, Rebecca M & Ruggles, Patricia, 1994. "Short-Term Recidivism among Public-Assistance Recipients," American Economic Review, American Economic Association, vol. 84(2), pages 49-53, May.
  11. Blank, Rebecca M., 1989. "Analyzing the length of welfare spells," Journal of Public Economics, Elsevier, vol. 39(3), pages 245-273, August.
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