Intergenerational Welfare Participation in New Zealand

Abstract

New Zealand panel data, which provide extensive information on the benefit histories of children and their parents, is used to estimate an intergenerational correlation coefficient in welfare participation. Recent estimation techniques for addressing issues of measurement error are applied in this analysis (Zimmerman 1992, Solon 1992, Bjorklund and Jantti 1997, Couch, D. and T. Dunn 1997, Auginbaugh, 2000). The long-term benefit histories of parents and instrumental variable techniques provide lower and upper-bound estimates of the true intergenerational correlation. A remarkably narrow band is estimated for this parameter, placing this correlation coefficient at slightly less than 0.4. Approximately one-third of this effect appears to operate through the lower educational attainment of children reared in families receiving social welfare benefits.