Measuring State Dependence in Individual Poverty Status: Are there Feedback Effects to Employment Decisions and Household Composition?
No 429, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
Using a sample of prime-aged men from the German Socio-Economic Panel (GSOEP), this paper examines the effects of past poverty experience on future poverty status, future employment status and household composition. The empirical results suggest that even after controlling for observed and unobserved characteristics, past poverty experience increases the poverty risk of future periods. Moreover, there is evidence that experiencing poverty has a negative effect on future employment behaviour and on household cohesion. Apart from its economic significance, the existence of such feedback effects is interesting from an econometric point of view, as they represent a violation of the strict exogeneity assumption, which is usually invoked in estimating dynamic qualitative response models with unobserved heterogeneity.
Keywords: Poverty persistence; Dynamic binary response models; Correlated random effects; Initital conditions; Strict exogeneity (search for similar items in EconPapers)
JEL-codes: C33 D31 I32 J12 (search for similar items in EconPapers)
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Working Paper: Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition? (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp429
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