The dynamics of immigrant welfare and labor market behavior
Authors: Jörgen Hansen and Magnus Lofstrom
This paper analyzes transitions into and out of social assistance, unemployment, and employment. We estimate a dynamic multinomial logit model, controlling for endogenous initial condition and unobserved heterogeneity, using a large representative Swedish panel data set. The empirical results suggest that particularly refugee immigrants display a greater degree of ‘structural’ state dependence than natives. The high welfare participation rates among refugee immigrants may be due to the existence of a ‘welfare trap’, while participation among natives and non-refugee immigrants is largely due to permanent unobserved characteristics. These results suggest that welfare reforms may have differential effects on refugee immigrants and natives.
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