On the basis of a longitudinal administrative dataset(1991-2002) merged with
the Socio-economic Survey of 2001 and the National Register, the majority of
the poor elderly in Belgium appear to be persistently poor. The question
arises why this might be so. To the extent that individual characteristics
such as low abilities persist over time, they may also be the reason that
individuals persist in poverty over time. In that case, one expects that
once individual characteristics are controlled for, duration dependence
becomes spurious. The alternative possibility is that poverty experience
has a causal impact on future poverty. This may be because of a poverty
trap: people may be given an incentive not to work while at the same time
they slip into poverty. Or this may be due to depreciation of human capital
or loss of motivation. The reasons for dependence in poverty are of
interest for developing effective poverty reducing measures since true
dependence would suggest to focus on stigma and adverse labour market
incentives while spurious dependence would suggest to change individual’s
characteristics. The simultaneous estimation of a multiple-spell
discrete-time hazard model of transitions in and out of poverty, that allows
for unobserved effects and a significant initial condition problem, lends
strong empirical support for true duration dependence in poverty.
This suggestion sounds reasonable since in Belgium elderly unemployed are
exempted from the search for a job and thus easily exposed to depreciation
of human capital and employers are reluctant to invest in the human capital
of elderly workers. In addition in Belgium both employers and the
government design retirement pathways that give elderly strong incentives to
leave the labour market as soon as possible.
Presented by:
Marjan Maes (ECASS visitor, UCLouvain and HUBrussel)
Date & time:
July 16, 2008 12:00 pm - July 15, 2008 11:00 pm
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