Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition?

No 1138, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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: correlated random effects; poverty persistence; strict exogeneity; initital conditions; dynamic binary response models (search for similar items in EconPapers)
JEL-codes: C33 D31 I32 J12 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-05
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (35)

Published - revised version published in: Journal of Applied Econometrics, 2009, 24 (7) 1095-1116

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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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