Do Welfare Dependent Neighbors Matter for Individual Welfare Dependency?

13 Pages Posted: 8 Apr 2016

See all articles by Thomas K. Bauer

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen); University of Bochum - Faculty of Economics; IZA Institute of Labor Economics

Rui Dang

Istanbul Technical University; Dartmouth College - Dartmouth Institute for Health Policy and Clinical Practice; Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Date Written: February 1, 2016

Abstract

This paper investigates neighborhood peer effects on individual welfare using a combined IV and control function approach. The empirical analysis is based on panel data for the years 2007-2010 constructed by enriching the geo-referenced version of the German Socio-Economic Panel (GSOEP) with aggregated zip code level-information. The results suggest that individual welfare use is positively correlated with neighborhood social benefit recipient rates, i.e. an increase in the share of neighborhood peers on social benefit by 1 percentage point raises the individual probability of welfare use by 0.97 percentage points.

Keywords: Neighborhood effects; welfare use; non-random sorting

JEL Classification: I38, R23

Suggested Citation

Bauer, Thomas K. and Dang, Rui, Do Welfare Dependent Neighbors Matter for Individual Welfare Dependency? (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2758653 or http://dx.doi.org/10.2139/ssrn.2758653

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

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University of Bochum - Faculty of Economics ( email )

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IZA Institute of Labor Economics ( email )

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Rui Dang (Contact Author)

Istanbul Technical University ( email )

Maçka
Istambul
Turkey

Dartmouth College - Dartmouth Institute for Health Policy and Clinical Practice ( email )

United States

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

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