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Book part
Publication date: 6 August 2014

Kenneth Y. Chay and Dean R. Hyslop

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different…

Abstract

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different specifications of the model are estimated using female welfare and labor force participation data from the Survey of Income and Program Participation. These include alternative random effects (RE) models, in which the conditional distributions of both the unobserved heterogeneity and the initial conditions are specified, and fixed effects (FE) conditional logit models that make no assumptions on either distribution. There are several findings. First, the hypothesis that the sample initial conditions are exogenous is rejected by both samples. Misspecification of the initial conditions results in drastically overstated estimates of the state dependence and understated estimates of the short- and long-run effects of children on labor force participation. The FE conditional logit estimates are similar to the estimates from the RE model that is flexible with respect to both the initial conditions and the correlation between the unobserved heterogeneity and the covariates. For female labor force participation, there is evidence that fertility choices are correlated with both unobserved heterogeneity and pre-sample participation histories.

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Book part
Publication date: 6 August 2014

Lorenzo Cappellari and Stephen P. Jenkins

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…

Abstract

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.

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Book part
Publication date: 6 August 2014

Sebastian Königs

I study state dependence in social assistance receipt in Germany using annual survey data from the German Socio-Economic Panel for the years 1995–2011. There is…

Abstract

I study state dependence in social assistance receipt in Germany using annual survey data from the German Socio-Economic Panel for the years 1995–2011. There is considerable observed state dependence, with an average persistence rate in benefits of 68 per cent comparing to an average entry rate of just above 3 per cent. To identify a possible structural component, I estimate a series of dynamic random-effects probit models that control for observed and unobserved heterogeneity and endogeneity of initial conditions. I find evidence of substantial structural state dependence in benefit receipt. Estimates suggest that benefit receipt one year ago is associated with an increase in the likelihood of benefit receipt today by a factor of 3.4. This corresponds to an average partial effect of 13 percentage points. Average predicted entry and persistence rates and the absolute level of structural state dependence are higher in Eastern Germany than in Western Germany. I find only little evidence for time variation in state dependence around the years of the Hartz reforms.

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Safety Nets and Benefit Dependence
Type: Book
ISBN: 978-1-78441-110-7

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Book part
Publication date: 6 August 2014

Jorgen Hansen, Magnus Lofstrom, Xingfei Liu and Xuelin Zhang

This article analyzes transitions into and out of social assistance (SA) in Canada. We estimate dynamic probit models, controlling for endogenous initial conditions and…

Abstract

This article analyzes transitions into and out of social assistance (SA) in Canada. We estimate dynamic probit models, controlling for endogenous initial conditions and unobserved heterogeneity, using longitudinal data extracted from the Survey of Labour and Income Dynamics (SLID) for the years 1993–2010. The data indicate that there are substantial provincial differences in SA participation with higher participation rates in the eastern part of the country. However, since the mid-1990s, participation rates have fallen substantially in all provinces with only a modest increase at the end of the observation period. Results from the probit models suggest that there is a significant time dependency in social assistance, even after controlling for endogenous initial conditions and unobserved heterogeneity. The extent of this state dependence varies across provinces.

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Book part
Publication date: 26 November 2020

Alessio Fusco and Nizamul Islam

This paper investigates the effect of household size, and in particular of the number of children of different age groups, on poverty, defined as being in a situation of…

Abstract

This paper investigates the effect of household size, and in particular of the number of children of different age groups, on poverty, defined as being in a situation of low income. We apply various static and dynamic probit models to control for the endogeneity of the variables of interest and to account for unobserved heterogeneity, state dependence, and serially correlated error components. Using Luxembourg longitudinal data, we show that the number of children of different age groups significantly affects the probability of being poor. However, the magnitude of the effect varies across different specifications. In addition, we find strong evidence of true poverty persistency due to past experience, spurious poverty persistency due to individual heterogeneity, and transitory random shocks.

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Inequality, Redistribution and Mobility
Type: Book
ISBN: 978-1-80043-040-2

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Book part
Publication date: 6 August 2014

Abstract

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Safety Nets and Benefit Dependence
Type: Book
ISBN: 978-1-78441-110-7

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Book part
Publication date: 19 October 2020

Seth Richards-Shubik

This chapter discusses the empirical application of a class of strategic network formation models, using the approach to identification introduced by de Paula

Abstract

This chapter discusses the empirical application of a class of strategic network formation models, using the approach to identification introduced by de Paula, Richards-Shubik, and Tamer (2018). The author emphasizes the interplay between model specification and computational complexity, and suggests tactics to make empirically realistic models become tractable. Two detailed examples, on friendship networks and coauthorship networks, are used to illustrate these issues and to demonstrate the performance of the approach with both simulation and empirical evidence. Also, the author presents extensions to the estimation method, which expand the potential range of applications, and which provide statistical inference with minimal computational burden.

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Book part
Publication date: 3 June 2008

Glenn W. Harrison and E. Elisabet Rutström

We review the experimental evidence on risk aversion in controlled laboratory settings. We review the strengths and weaknesses of alternative elicitation procedures, the…

Abstract

We review the experimental evidence on risk aversion in controlled laboratory settings. We review the strengths and weaknesses of alternative elicitation procedures, the strengths and weaknesses of alternative estimation procedures, and finally the effect of controlling for risk attitudes on inferences in experiments.

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Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Book part
Publication date: 18 October 2019

Mohammad Arshad Rahman and Angela Vossmeyer

This chapter develops a framework for quantile regression in binary longitudinal data settings. A novel Markov chain Monte Carlo (MCMC) method is designed to fit the model…

Abstract

This chapter develops a framework for quantile regression in binary longitudinal data settings. A novel Markov chain Monte Carlo (MCMC) method is designed to fit the model and its computational efficiency is demonstrated in a simulation study. The proposed approach is flexible in that it can account for common and individual-specific parameters, as well as multivariate heterogeneity associated with several covariates. The methodology is applied to study female labor force participation and home ownership in the United States. The results offer new insights at the various quantiles, which are of interest to policymakers and researchers alike.

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Topics in Identification, Limited Dependent Variables, Partial Observability, Experimentation, and Flexible Modeling: Part B
Type: Book
ISBN: 978-1-83867-419-9

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Abstract

Several popular and academic pieces of late have expressed concerns regarding the sustainability of public defined benefit pension funds. Since the onset of the Great Recession, concern has increased. In this paper recent arguments are analyzed in the context of three related data sets: panel data on public sector pensions spanning 2001-2009, historic asset return data, and business cycle data. Findings generally indicate that while public sector plans have suffered a difficult decade, current anxieties may be somewhat overwrought. Several remedial policies are investigated. Remedial policies, such as improving plan administration, altering portfolio allocations, and increasing both employee and employer contributions, are observed to be more promising than either freezing or closing the funds.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 25 no. 2
Type: Research Article
ISSN: 1096-3367

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