The Dynamics of Social Assistance Benefit Receipt in Germany: State Dependence Before and after the 'Hartz Reforms'

34 Pages Posted: 1 Mar 2014

See all articles by Sebastian Königs

Sebastian Königs

Organization for Economic Co-Operation and Development (OECD) - Social Policy Division; IZA Institute of Labor Economics

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Abstract

In this article, I study state dependence in social assistance receipt in Germany using annual survey data from the German Socio-Economic Panel (SOEP) for the years 1995-2011. There is considerable observed state dependence, with an average persistence rate in benefits of 68% comparing to an average entry rate of just above 3%. 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 including for the years around the Hartz reforms.

Keywords: Germany, state dependence, welfare benefits, social assistance, Hartz reforms

JEL Classification: I38, J60, J64, C23

Suggested Citation

Königs, Sebastian, The Dynamics of Social Assistance Benefit Receipt in Germany: State Dependence Before and after the 'Hartz Reforms'. IZA Discussion Paper No. 7977, Available at SSRN: https://ssrn.com/abstract=2403114

Sebastian Königs (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Social Policy Division ( email )

Paris
France

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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