Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition

This paper argues that the assumption of strict exogeneity, which is usually invoked in estimating models of state dependence with unobserved heterogeneity, is violated in the poverty context as important variables determining contemporaneous poverty status, in particular employment status and household composition, are likely to be influenced by past poverty outcomes. Therefore, a model of state dependence is developed that explicitly allows for possible feedback effects from past poverty to future employment and household composition outcomes. Empirical results based on data from the German Socio‐Economic Panel (GSOEP) suggest that there are indeed such feedback effects and that failure to take them into account may lead to biased estimates of the state dependence effect. Copyright © 2009 John Wiley & Sons, Ltd.     

Unemployment persistence: Is there evidence for stigma effects?

We explore the idea that a negative relationship between individual unemployment persistence and the business cycle can be interpreted as evidence for stigma effects. Our results suggest that there is weak evidence for stigma effects.