Umeå Economic Studies, Department of Economics, Umeå University
No 650:
Heterogeneity or True State Dependence in Poverty - The tale told by twins
William Nilsson ()
Abstract: This study focuses on the persistence of poverty in
Sweden. The purpose is to distinguish between two different reasons why
poverty could persist on an individual level. By using a sample of
identical twins, this study takes advantage of the similarity within pairs
of twins to separate family specific heterogeneity from true state
dependence, where the experience of poverty leads to a higher risk of
future poverty. The results, based on a four variate probit model, show the
importance of true state dependence in poverty. When using the information
on whether an individual received social assistance as a measure of
poverty, family specific heterogeneity explains between 24 and 31 percent
of the poverty persistence in the sample.
Keywords: poverty; heterogeneity; state dependence; twins; multivariate probit; (follow links to similar papers)
JEL-Codes: C35; D31; I32; (follow links to similar papers)
40 pages, April 8, 2005
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