Differential Effects of Expansions and Recessions on Social Assistance Duration: The Case of Regional Minimum Income Programmes in Spain

Abstract

In this paper we study the effects of the business cycle on welfare benefit duration and successful exits from the welfare programs. We construct durations for households entering these programs using administrative data for the total population participating in 2005-2016 in Minimum Income Integration programs in Spain,and combine these with province-level data on aggregate unemployment rate. We estimate discrete hazard models to analyse whether different labour conditions at entry to the program significantly affect the length of participation, and whether favourable conditions increase or decrease the hazard of a successful leaving the program. Our results show that higher unemployment rates are related to lower probability of successful exit from the program, and this effect becomes larger during recessions than in expansion periods.