Is Welfare Dependency Inherited? Estimating Causal Welfare Transmission Effects Using Swedish Sibling Data

Published date01 September 2015
Date01 September 2015
338 Intersentia
K E and K H*
is study tests whether individual s who grow up with parents on welfare bene ts are
themselves more (or less) likely to be welfare recipients as young adults, compared to
individuals who grow up in non-welfare house holds. Using detailed register-ba sed
information on full Swedish cohorts bor n in 1982 and 1983 and their parents, we
estimate the intergenerational correlation in we lfare bene t receipt.  e results indic ate
a strong positive correlation, even a er we control for a large set of househol d level
and parental characteristics.  e correlation is particularly strong for children who are
exposed to parental welfare bene t spells dur ing their late teenage years. We then make
use of the sibling di erence method to control for unobserved heterogeneity, and thus
identify causal e ects.  is sibling analysis provides no support for a caus al e ect of
parents’ welfare bene t receipt on children’s future welfare use.  e lack of evidenc e for
a causal intergenerational e ect might be due to the fact that the sibling method c an
only be applied to short-term welfare spells. W hether the e ect looks di erent for long-
term spells is an intere sting topic for future research, but one that cannot be investigated
using the sibling method.
Keywords: intergenerational mobil ity; sibling approach; social assistance; welfare
bene ts
* Karin Ed mark (corresponding author) works at t he Research Inst itute of Industria l Economics,
Stockholm. Add ress: P.O. Box 55 665, SE-102 15 Stockholm, Sweden; phone: +46 –8–665 45 00 ;
e-mail: ka rin.edmark@ Kajsa Ha nspers was employed in t he Department of Econom ics,
Uppsala Universit y when this art icle was writt en. For construct ive and useful c omments, they
would like to th ank Eva Mörk, Marku s Jäntti, Per-Anders Edi n, Erik Grönqvi st and seminar
participa nts at Uppsala University, Umeå Universit y, IFAU, the 2008 IIPF Annual Cong ress in
Maastricht , and the 8th Journées Louis-And ré Gérard-Varet in Marseille. R esearch grants from t he
Swedish Counci l for Working Life and Socia l Research (FAS), and from the Ja n Wallander and Tom
Hedelius Foundat ion are also gratefu lly acknowledged .
Is Welfare Dependency In herited?
European Jour nal of Social Sec urity, Volume 17 (2015), No. 3 339
Welfare bene t policy is an area that has received considerable political interest in
many countries duri ng the last decades. Since the 1990s, severa l countries in Europe
and North America have sought to reform t heir welfare bene t systems in order to
decrease caseloads and increase employment.1 One motivation for these policies is
the fear that having a la rge population on welfare may produce ‘welfare cultures’; i.e.,
situations where individuals are trapped in povert y and the use of welfare spreads
through socia l interaction. Such interaction may take place between individuals in
various social net works, for example between parents and children.
is paper investigates t he link between parents’ a nd children’s welfare bene t
receipt, using a data set that covers the full Swedish cohort born in 1982–1983, their
siblings, and their pa rents. We  rst estimate the intergenerational correlation in
welfare bene t use, conditional on a la rge set of household-level characteristics.  us,
we estimate how much of the intergenerational raw correlation in welfare bene t
receipt remains a er we control for a large set of observable factors. We then use a
sibling-based comparison to c ontrol for the e ects of unobserved family heterogeneity,
and estimate the causal component of the intergenerational correlat ion.
ere are several ways in which parental welfare bene t receipt could a ect the
children’s welfare use as adults: children of welfare recipients may develop less of
a natural connection to paid work and have less access to work-related networks,2
which may make them more likely to receive welfa re as adults; children of welfare
recipients may learn how the welfare bene t system works, and what life on welfa re
is like, which may make t hem either more or less likely to use welfare; and ch ildren
of welfare recipients may experience welfare receipt as more or less st igmatising.  e
e ects we consider are related to viewing the parents as role models; to attitudes to
welfare bene ts; and to access to employment-related networks t hrough parents.
Such types of e ects may vary in importance for a chi ld at di erent ages.
Employment-related networks are naturally more releva nt for children closer to
working-age, and feelings of stig matisation are probably stronger if the chi ld is a
bit older and more aware of the situation outside of the household.  e impact of
the discussed mechanisms may also grow w ith the length of time that children are
exposed to parental welf are bene t receipt.  is is because lea rning about the welfare
bene t system and forming habits are things that may requi re some time. It is thus
possible that children i n households in receipt of long-term bene ts are more strongly
a ected than children i n households with short-term bene t spells.
1 See Dahlberg et al.(2008) for the Swedish case , or Brewer (2008) for an overview of reform s in the
2 at parental networks can be important in Sweden is con rmed by Kramarz a nd Nordström-
Skans (2011).

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