Abstract
We study state dependence in welfare receipt and investigate whether welfare transitions changed after a welfare reform. Using data from the German Socio-Economic Panel, we apply dynamic multinomial logit estimators and find that state dependence in welfare receipt is not a central feature of the German welfare system. We find that welfare transitions changed after the reform: Transitions from welfare to employment became more likely and persistence in welfare and inactivity declined. We observe a large relative increase in transitions from employment to welfare. Immigrants’ responsiveness to the labor market situation increased after the reform.
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