Is there a welfare trap? Duration dependence in social assistance recipiency among young Finns

Abstract

The probability of social assistance exit decreasing over time is called negative duration dependence. This is one of the most debated aspects of social assistance receipt. This study analyses duration dependence among young adults in Finland and aims to show how social assistance receipt per se affects the likelihood of exiting social assistance. It also examines whether parental recipiency is associated with duration dependence. While the intergenerational transmission of social assistance has received extensive research attention, there is a scarcity of evidence on whether parental recipiency is associated with social assistance exits and duration effects. This study uses full monthly history of social assistance receipt between the ages of 19 and 29 years. The analyses are based on Finnish register data and conducted using discrete-time event-history models (pooled logistic, random-effect logistic and fixed-effect logistic). The findings indicate that controlling for all time-invariant characteristics significantly reduces but does not completely remove duration dependence among young adults. They also show that those whose parents received social assistance are less likely to exit social assistance. In models controlling for all time-invariant characteristics, parental social assistance receipt is also linked with stronger duration dependence. The implications of these findings are discussed.