Abstract
New Zealand panel data, which provide extensive information on the benefit histories of parents and their children, are used to estimate an intergenerational correlation coefficient in social welfare dependency. Recent estimation techniques for addressing issues of measurement error are applied to this analysis. The long‐term benefit histories of parents and instrumental variable techniques provide useful lower and upper‐bound estimates of the true intergenerational correlation. Our results suggest that the true correlation coefficient between the welfare participation of parents and their offspring is somewhere between one‐third and two‐thirds, but probably much closer to the lower limit in this range. Approximately one‐quarter of this effect appears to operate through the lower educational attainment of children reared in families receiving social welfare benefits.
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