We analyse the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate rather than by the SA exit rate (which also declined). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA receipt probabilities applied to British Household Panel Survey data. We show how the model may be used to derive year-by-year predictions of aggregate SA entry, exit and receipt rates. The analysis highlights the importance of the decline in the unemployment rate over the period and other changes in the socio-economic environment including two reforms to the income maintenance system in the 1990s and also illustrates the effects of self-selection (‘creaming’) on observed and unobserved characteristics.
This major revision of IZA discussion paper 4457 and ISER working paper 2009-29 was prepared with financial assistance from the ESRC Research Centre on Micro-Social Change (grant number RES-062-23-1455). For helpful comments and suggestions at various stages, we thank the editors, anonymous referees, Thomas Andrén, Martin Biewen, Ken Couch, Jörgen Hansen, Herwig Immervoll, Sebastian Königs, Alfonso Miranda, Chris Orme, Lucinda Platt, Mark Stewart, and audiences at the Universities of Melbourne, Munich, Nuremburg, and Queensland, Motu Research (Wellington), NIESR (London), SPRC (Sydney), the Welsh Economics Colloquium, the Wisconsin Summer Research Workshop, the annual congresses of the Italian Association of Labour Economists and European Society for Population Economics, the Joint OECD/University of Maryland International Conference on ‘Measuring Poverty, Income Inequality, and Social Exclusion: Lessons from Europe’, and the IZA/OECD/World Bank Conference on ‘Safety Nets and Benefit Dependence’.
Cappellari, L. and Jenkins, S.P. (2014), "The Dynamics of Social Assistance Benefit Receipt in Britain", Safety Nets and Benefit Dependence (Research in Labor Economics, Vol. 39), Emerald Group Publishing Limited, Bingley, pp. 41-79. https://doi.org/10.1108/S0147-912120140000039000
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