Time Aggregation and State Dependence in Welfare Receipt

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Dynamic discrete-choice models are an important tool in studies of state dependence in benefit receipt. A common assumption of such models is that benefit receipt sequences follow a conditional Markov process. This property has implications for how estimated periodto-period benefit transition probabilities should relate when receipt processes are aggregated over time. This paper assesses whether the conditional Markov property holds in welfare benefit receipt dynamics in Norway using high-quality monthly data from administrative records. We find that the standard conditional Markov model is seriously misspecified. Estimated state dependence is affected substantially by the chosen time unit of analysis, with the average treatment effect of past benefit receipt increasing with the level of aggregation. The model can be improved considerably by permitting richer types of benefit dynamics: We find strong evidence for both duration and occurrence dependence in benefit receipt. Allowing for heterogeneity in the entry and persistence processes, we find important disparities in the effects of observed and persistent unobserved characteristics. Based on our preferred model, the month-to-month persistence probability in benefit receipt for a first-time entrant is 37 percentage points higher than the entry rate of an individual without previous benefit receipt. Over a 12-month period, this corresponds to an average treatment effect of 5 percentage points. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: I38, J60, J64, C23, C41

Are Recipients of Social Assistance 'Benefit Dependent'?

“…The analysis summarises and extends recent country studies on the dynamics of SA receipt for Norway (Bhuller & Königs, 2011;Bhuller, Brinch & Königs, 2014), Luxembourg (Königs, 2012), and the Netherlands (Königs, 2013). In addition, it presents previously unpublished results for Sweden.…”

“…The analysis draws on results provided in earlier country studies on SA benefit receipt initiated as part of this project. They include Britain (Cappellari & Jenkins, 2008a, 2014, Norway (Bhuller & Königs, 2011, Bhuller, Brinch & Königs, 2014, Luxembourg (Königs, 2012), Germany (Königs, 2013a(Königs, , 2014a, the Netherlands (Königs, 2013b), and Canada (Finnie & Pavlic, 2013). For Latvia, results are taken from material prepared by the World Bank (World Bank, 2013).…”

“…Grogger (2004) using US Survey of Income and Program Participation data. In a recent study based on monthly data for Norway, Bhuller, Brinch, and Königs (2014) test for different types of state dependence and find evidence for occurrence dependence in social assistance entries and for duration dependence both on and off benefits. However, most studies of SA receipt for other countries have SA receipt histories at the annual level and model binary sequences of receipt and non-receipt and they do not look at spells.…”

Time Aggregation and State Dependence in Welfare Receipt

“…To illustrate that our main results hold for a more standard sample, we have replicated the most important parts of our analysis using a 5% random sample of all 25–59 year‐olds. The results from this robustness check are presented in an earlier working paper (Bhuller et al ., , Appendix A.3, pp. 55–61) but are omitted from this article for the sake of brevity.…”

Interest Arbitration and the Narcotic Effect: Evidence from Three Decades of Collective Bargaining in Ontario

“…As shown by Bhuller et al . () these sorts of the data could be sensitive to misspecification of the model so that the extent of the state dependence estimated could be affected by the observation interval in the data, that is, exhibit a time aggregation bias in which estimates between monthly and annual data differ. Our contract data are not likely to be subject to these sorts of problems because the data represent distinct events that occur at discrete points in time and so cannot be represented on a finer time scale.…”