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ABSTRACT
This paper analyses the dynamics of the duration of housing allowance claims in Sweden during the period 1991 to 2002. The central concern in this paper is whether the Swedish housing allowance system creates dependence on welfare. Using longitudinal data from Swedish micro-database LINDA, this paper found that there is no evidence of negative duration dependence arising from the duration of housing allowance claims. This finding is consistent across different model specifications and various controls of the heterogeneity issue. Hence we come to the conclusion that a recipient's exit rate from the system does not decrease over the duration claim. This paper also shows that the demographic characteristics, educational background, labour market status and economic contextual conditions play important roles in determining recipients' conditional probability of exiting from the housing allowance system. However, there are substantial variations in the factors' impact across different household types.
Acknowledgements
The helpful comments from Mats Wilhelmsson, Viggo Nordvik and Geoffrey Meen are highly appreciated. The help from Mark Stephens on word editing is also gratefully acknowledged. All remaining errors are my own.
Notes
1. Housing allowance is the term widely used in mainland Europe, but is better known as housing voucher and rent certificate in US, as housing benefit in UK, and as shelter assistance in Canada.
2. Positive duration dependence implies a recipient's conditional exit propensity increases over their welfare history while negative duration dependence occurs when a recipient's leaving probability declines as his claim continues.
3. A primary argument of the so-called ‘welfare trap hypothesis’ is the depreciation of human capital after periods of labour market inactivity (cf. CitationEdin & Gustavsson, 2004). Another argument is that one's preferences might be shifted towards leisure and a ‘welfare culture’ grows with the welfare experience (CitationPlant, 1984). Further, it is also suggested that one's welfare experience can be a negative signal of our personal motivation and competitiveness (CitationHoynes, 2000). No matter what is its major source, the welfare trap hypothesis has been widely corroborated in various welfare systems of developed countries (CitationMoffitt,1992; Behrendt, 2002).
4. The concept for ‘household’ defined here is basis of the definition used for tax purposes: two adult persons that are married/cohabiting and have children in common belong to the same family. Cohabiting persons that have no children in common are regarded as separate households (CitationEdin & Fredriksson, 2000).
5. During 2004, the conversion rate of Euro vs. SEK is on average 1:10.
6. The gross earning is what the Swedish Tax Authority defined as ‘the sum of all income from employment, business and capital’ (summa förvärvs-och kapitalinkoms), where the unemployment insurance is also taken into account. But government transfers like social assistance (socialbidrag) and child allowance (barnbidrag) are exempted. In practice, 15 per cent of the wealth surpassing a threshold level is included in the calculation of assessed income. In 2004, the threshold level of wealth is 100,000 SEK.
7. See more details from http://www.forsakringskassan.se/privatpers/bostadsbidrag/ on the website of the Swedish Social Insurance Agency.
8. The competing-risk model implies several exiting paths to be considered simultaneously.
9. The LR test statistic of homogeneity between the two couple groups with respect to the istribution of spell duration is 3.58 and not significant at 5 per cent.
10. Unlike linear regressions, the coefficients estimated by logit/probit/clogit models are confounded with residual variations, hence the coefficients are not directly comparable if the residual variations are not equal (CitationAllison, 1999).
11. A representative recipient is a native Swedish with one child, aged below 25, education attainment less than middle school, employed and employed at public administration sector, and resides in Stockholm County. The local housing market and labour market conditions are set at levels of population-average.
12. The use of rents has its own problem, however. The rental market in Sweden is strictly regulated and thus the over-time variations of rents are not only small but also lagging far behind market conditions.