Becoming unemployed and poor in Great Britain

ABSTRACT

In this study on Great Britain, we estimate the labour market and income process of prime-aged men simultaneously and control for spillover effects. Evidence is presented that the risk of becoming unemployed and poor increases with the duration of unemployment and decreases with the duration of employment. Moreover, the experience of poverty influences the labour market and income prospects negatively, though on a much smaller scale than does the labour market position.

KEYWORDS:

• Unemployment
• poverty
• state dependence
• bivariate random-effects probit model
• British Household Panel Survey (BHPS)

JEL CLASSIFICATION:

• J64
• J62
• I32
• C33

Acknowledgment

This work was supported by the German Research Foundation (DFG) under Grant KN 984/1-1.

Disclosure statement

No potential conflict of interest was reported by the author.

Supplemental data

Supplemental data for this article can be accessed here.

Notes

¹ A distributional chart of the spell length of the different labour market positions can be found in the supplemental data.

² Explanatory variables are: post-secondary education (dummy), age (four categories), marital status (dummy), regional unemployment rate, spouse working (dummy), number of children living in household (categorical: 0, 1, 2, 3, 4+), year dummies.

³ Note that refers to the explanatory variables post-secondary education and marital status.

⁴ The complete estimation output can be found in the supplemental data.

⁵ The hypothesis that all three coefficients are of the same size is strongly rejected, .

⁶ The example refers to the risk difference between someone who is short-term unemployed (<90 days) and entrants into employment (employment spell below 90 days). The remaining average partial effects are calculated accordingly.

⁷ The average partial effect is significantly different from zero at the 1% level.

Additional information

Funding

This work was supported by the German Research Foundation (DFG) [KN 984/1-1].