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State Dependence in Canadian Welfare Participation

Jorgen Hansen (), Magnus Lofstrom () and Xuelin Zhang ()
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Xuelin Zhang: Statistics Canada

No 2266, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyzes transitions into and out-of Social Assistance in Canada. We estimate a dynamic Probit model, controlling for endogenous initial conditions and unobserved heterogeneity, using longitudinal data extracted from the Survey of Labour and Income Dynamics (SLID) for the years 1993-2000. The data indicates that there are substantial provincial differences in social assistance participation. The empirical results indicate that a “welfare trap” does exist in Canada, but the extent of it varies across provinces. The results also suggest that there is a link between provincial variations in structural and spurious state dependence and regional differences in welfare generosity. In particular, the existence of structural state dependence, or a “welfare trap”, appears to be more likely in provinces with relatively high benefit levels. One implication of this result is that a change in the welfare benefit structure is not likely to lower participation as significantly among less generous provinces as more generous ones.

Keywords: welfare; state dependence; unobserved heterogeneity; initial conditions; transition; Canada (search for similar items in EconPapers)
JEL-codes: I30 I38 J18 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2006-08
New Economics Papers: this item is included in nep-dcm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published - published in: Research in Labor Economics, 2014, 39, 81-105

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