Abstract
The question of high welfare re-entry rates has attracted great attention from economists and policymakers. Using a very rich administrative data set for the minimum income program of the Madrid Government (over 50,000 spells), this paper aims to broach various questions arising from the issue of welfare re-entry. We try to identify what factors determine observed differences in the durations of the first off-welfare spell. We analyze the combined effects of the length and type of exit of the first spell, unemployment, and sociodemographic characteristics. The experience of the first spell and, to a lesser extent, employability can contribute toward lengthening the time spent outside the program. Our results also show that off-welfare spells of households leaving the program in periods of low economic growth will be longer than those that do so during economic expansions. With the exception of unemployment effects, our estimates yield very similar results to those obtained in the U.S. studies, suggesting that U.S. welfare policies and analyses are not entirely irrelevant for European discussions of welfare policies.
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Notes
Moffitt (2002) also points toward the importance of the type of exit. Against the notion of greater exit flows of higher skilled recipients foreseen in conventional theories, he found that differences in re-entry by labor market skills were not too big. This would seem to suggest that the cause of such flows could lie in a segment of the recipients encountering greater difficulties in fulfilling administrative obligations.
IMI data have been used in order to analyze other aspects of welfare dynamics, like caseload variation (Ayala and Pérez 2005), effectiveness of welfare-to-work strategies (Ayala and Rodríguez 2006), barriers to employment (Ayala and Rodríguez 2007a), and differential exits (Ayala and Rodríguez 2007b).
Despite an extensive literature on welfare dynamics in other European countries, there have been few studies analyzing re-entries. Dahl and Lorentzen (2003), Andren and Gustafsson (2004), Melkersson and Saarela (2004), and Bergmark and Bäckman (2004) provide certain evidence of lower exit rates in Nordic countries and high recidivism of young adults and newly arrived immigrants. Shaw et al. (1996) used a 2-year period to consider the extent to which claimants return to Income Support in the UK, finding that the experience of repeatedly claiming benefit is quite common. Their results are rather different from those of the U.S. literature, since qualifications were not apparently related to recidivism and people moving off the program after a long spell were less likely to return.
Some studies have found significant and positive effects of regional mean income on the level of benefits. However, empirical estimates show no sign of a “welfare magnet” problem.
The definitions for leavers vary considerably in the different studies addressing the issue. For instance, some studies consider leavers as the households who leave programs and remain outside them for at least a year (Moffitt and Roff 2000) while others typify them as claimants who leave the program for at least two consecutive months within a specific time interval (Miller 2002).
There is no general agreement on the definition of stayers. Our definition slightly differs from those generally used in the U.S. Other studies only consider as stayers people who are still on welfare at the end of the observation period or even people who had multiple welfare spells but spent the majority of the follow-up period on welfare.
The advantages and limitations of this option compared to other more flexible procedures have been widely discussed since the ground-breaking critical study by Heckman and Singer (1984).
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Acknowledgements
We thank Rebecca Blank, Olga Cantó, Jeffrey Grogger, and the participants at seminars in Atlanta, Barcelona, Madrid, Michigan, Valencia, and Vigo for the helpful comments. We are very grateful to the anonymous referees for the extremely helpful comments. Financial support for this research was provided through the Ministry of Science and Technology (SEJ2007-67911-C03-03) and the Instituto de Estudios Fiscales.
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Ayala, L., Rodríguez, M. Explaining welfare recidivism: what role do unemployment and initial spells have?. J Popul Econ 23, 373–392 (2010). https://doi.org/10.1007/s00148-009-0268-1
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DOI: https://doi.org/10.1007/s00148-009-0268-1