Working Paper: CEPR ID: DP4539
Authors: Jrgen Hansen; Roger Wahlberg
Abstract: This Paper analyses the persistence of poverty in Sweden using a hazard rate model based on multiple spells. The model also accounts for unobserved heterogeneity and possibly endogenous initial conditions. We estimate the model on a large representative Swedish panel dataset, LINDA, for the years 1991-2001. The data contains precise information on household disposable income obtained from individual tax files. Poverty is defined using information on annual minimum needs standards determined by the Swedish National Board of Health and Welfare. The data indicates that poverty rates are highest for immigrants, especially refugee immigrants, and for households with children. Further, poverty rates declined, both for natives and for immigrants, between 1991 and 2001, partly as a result of improved labour market conditions. The empirical results suggest that there is significant negative duration dependence in both exit and entry hazard rates. Moreover, the transition rates are significantly affected by immigrant status, educational attainment, labour market conditions, age, and family status. Accounting for multiple spells shows that for two-parent families with two children who are represented by a male person, 44% of native households that fall into poverty at any given point in time remain poor in five or more out of the next ten years. For refugee and non-refugee households, the figures are 62% and 50%, respectively.
Keywords: duration dependence; multiple spells; poverty persistence; unobserved heterogeneity
JEL Codes: C23; C41; D31; I32; J15; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Negative duration dependence in exit hazard rates (C41) | Households are less likely to exit poverty (D19) |
| Negative duration dependence in entry hazard rates (C41) | Households are more likely to enter poverty (I32) |
| Family structure (J12) | Persistence of poverty (I32) |
| Educational attainment (I21) | Poverty entry rates (I32) |
| Labor market conditions (J29) | Exit rates from poverty (I32) |
| Immigrant status (K37) | Persistence of poverty (I32) |