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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.

Suggested Citation

  • Wunder, Christoph & Riphahn, Regina T., 2011. "The dynamics of welfare entry and exit among natives and immigrants," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 49162, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc11:49162

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    References listed on IDEAS

    1. Leilanie Basilio & Thomas K. Bauer & Anica Kramer, 2017. "Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany," LABOUR, CEIS, vol. 31(3), pages 245-264, September.
    2. Bernt Bratsberg & Oddbjørn Raaum & Knut Røed, 2010. "When Minority Labor Migrants Meet the Welfare State," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 633-676, July.
    3. Alan Barrett & Yvonne McCarthy, 2008. "Immigrants and welfare programmes: exploring the interactions between immigrant characteristics, immigrant welfare dependence, and welfare policy," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 543-560, Autumn.
    4. 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.
    5. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
    6. 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).
    7. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling Low Pay Transition Probabilities, Accounting for Panel Attrition, Non-Response, and Initial Conditions," CESifo Working Paper Series 1232, CESifo Group Munich.
    8. 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.
    9. 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.
    10. Blank, Rebecca M., 1989. "Analyzing the length of welfare spells," Journal of Public Economics, Elsevier, vol. 39(3), pages 245-273, August.
    11. 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).
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    Cited by:

    1. Bruckmeier, Kerstin & Wiemers, Jürgen, 2016. "Differences in welfare take-up between immigrants and natives : a microsimulation study," IAB Discussion Paper 201608, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Coban, Mustafa, 2017. "Wage mobility, wage inequality, and tasks: Empirical evidence from Germany, 1984-2014," Discussion Paper Series 139, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    3. Regina T. Riphahn & Christoph Wunder, 2016. "State dependence in welfare receipt: transitions before and after a reform," Empirical Economics, Springer, vol. 50(4), pages 1303-1329, June.
    4. Bruckmeier, Kerstin & Wiemers, Jürgen, 2016. "Differences in welfare take-up between immigrants and natives," Annual Conference 2016 (Augsburg): Demographic Change 145828, Verein für Socialpolitik / German Economic Association.
    5. Martin Biewen, 2014. "Poverty persistence and poverty dynamics," IZA World of Labor, Institute for the Study of Labor (IZA), pages 103-103, November.
    6. Francesco Bartolucci & Claudia Pigini, 2017. "Granger causality in dynamic binary short panel data models," Working Papers 421, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item


    welfare trap; Hartz Reform; welfare dependence; unemployment benefit II; immigration;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models


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