Welfare stigma allowing for psychological and cultural effects. An - - PowerPoint PPT Presentation

Welfare stigma allowing for psychological and cultural effects. An Agent-Based simulation study.

Dalit Contini

Università di Torino

Matteo Richiardi

Università Politecnica delle Marche LABOratorio Riccardo Revelli

Aim

To study the effects of income support on unemployment and welfare dynamics when social stigma is attached to welfare provision.

Stigma in the literature

Stigma is acknowledged as one of the determinants of welfare take-up behaviour (Hernanz et al 2004) and it has been modelled as a cost of entry into welfare (Moffit 1983). By providing a disincentive for welfare participation stigma negatively affects propensity to enter welfare: high cost of entering welfare low take-up rates Moreover: by reducing the work disincentive of welfare provision stigma should reduce unemployment. a “bad” a “good”

Our job-search model: main features

We let stigma affect preferences by representing a cost of entry into welfare, but in addition we assume that with stigma welfare provision can lead to a reduction of search effectiveness, due to:

• progressive loss of self-confidence of recipients
• unfavourable attitudes of potential employers

Moreover, we allow for interaction among individuals: when people live in environments where most people rely on welfare, preferences can change: the perceived cost of stigma is reduced thus benefit is more desirable.

Simulation study with Agent Based Modelling

Results in brief

With stigma:

• welfare take-up rates decrease
• welfare spells get longer
• unemployment rates are not monotonically related with the strength
• f stigma

As a consequence: we can find (ceteris paribus) higher levels of unemployment with stigma than with no stigma

The model.. Environment

• all individuals unemployed “at birth”
• nly full-time jobs
• no savings: consumption=income
• total time T=2

employed time for work h=1, time for leisure L=1 unemployed time for job-search time for leisure

• the employed lose their job with probability δ
• benefit unlimited

{ }

1 , ∈ s

{ }

2 , 1 ∈ L

C0 if unemployed without benefit consumption = B if unemployed with benefit CE if employed

Individuals choose whether to:

• search for a job
• enter welfare

The model.. Utility function

• Cobb-Douglas:
• Moffit’s model for stigma:
• Our specification:

β αL

C U =

( ) ( )

A L C U A L C U φ − = , , ,

( ) ( ) ( )A

f L C U f A L C U − − = 1 , , , , φ

β αL

C

proportion of welfare recipients among neighbours

The model.. Employment probability (given search)

When individuals enter work, employment probability goes back to initial value γ0

( ) ( )

A U

A U t

p

τ τ

θ θ γ − − = 1 1

loss of employability due to unemployment (loss of skills) loss of employability due to welfare (loss of self-confidence, negative attitudes of potential employers) time elapsed in unemployment time elapsed in welfare

The model.. Choice function

[ ] [ ]

2 2 1

R U E R U E U V + + =

( ) ( )( ) [ ] ( )( )( ) ( ) [ ]

2 1 1 2 2 2 1 1 1

1 ( 1 1 , , 1 , , , , R p p p U p p f A s U R p U p f A s U f A s U V

E E

− + + − − + + − + =

There are 26=64 different combinations of values 0 and 1 for (s0, A0, s1, A1, s2, A2). V0 is evaluated at each combination: the (s0, A0) maximising V0 is taken as the optimal choice for time t=0.

( ) ( ) ( )A

f L C U f A L C U − − = 1 , , , , φ

( ) ( ) ( )A

f L C U f A L C U − − = 1 , , , , φ

( ) ( )

A U

A U t

p

τ τ

θ θ γ − − = 1 1

preferences employability Identity stigma Treatment stigma

identity/treatment stigma Stuber, Schlesinger (Soc Sci & Med 2006) negative characterization

• f self-identity

concern about being treated poorly by others

INCOME C0=1 “charity” CE=4 employed BENEFIT (UNLIMITED) B=1.5 “low” B=2.5 “high” STIGMA

NOSTIGMA: θA=0, φ=0 STIGMA1: θA=0.1, φ=1 STIGMA2: θA=0.15, φ=1.5

JOB TURNOVER

initial prob find job γ0={0.25,0.4} prob lose job

δ=0.05

loss of skills θU=0.05

INDIVIDUAL CHOICES

UTILITY FUNCTION DISCOUNT FACTOR R=0.98

5 . 2L

C U =

LIFE LENGTH 120 TIME UNITS

Outputs:

• welfare take-up rates
• % unemployed
• % welfare participants
• unemployment spell length
• welfare spell length

cross- section longitudinal

0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3 1,4 1,5 0,2 0,4 0,6 0,8 1 1,2 unemployed assisted t-u rate 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2 0.2 0.4 0.6 0.8 1 1.2 unemployed assisted t-u rate

Φ Costo all’entrata θA Loss of employability

θA=0.1

CB=2.5

γ0=0.4 φ=1

CB=2.5

γ0=0.4

BENEFIT LOW BENEFIT LOW BENEFIT HIGH NOSTIGMA STIGMA1 NOSTIGMA % unemployed 13.3 26.3 14.3 % assisted 9.0 21.5 10.1 take-up rate 100.0 95.2 100.0 % searchers among assisted 99.0 43.4 84.9

BENEFIT LOW BENEFIT LOW BENEFIT HIGH NOSTIGMA STIGMA1 NOSTIGMA unemployment spell length n° spells 23639 21092 28743 50°, 75°, 90° percentile 2, 3, 6 2, 4, 8 2, 3, 6 welfare spell length n° spells 13569 10448 16730 50°, 75°, 90° percentile 2, 4, 6 2, 5, 15 2, 4, 6

DK SW ITA ESP

unemploy. rate (2003)

5.4 5.8 8.7 11.3

poverty rate (2000)

4.3 5.3 12.9 11.6

% persistent poor at least 3 years (1996)

2.5

• 8

8

take-up rate

n.e n.e n.e n.e

welfare spell length median (1990’s)

_ 3-4 months

(Gothemborg, Helsimborg)

6 months

(Torino)

26 months

(Barcelona)

OECD, 2005 OECD, 2005 EUROSTAT, 2002

(ECHP)

Hernanz et al, 2004 Saraceno, 2002

(ESOPO)

Limits and further developments

• sensitivity analysis
• choice function: only 3 periods considered
• calibration of parameter
• behavioural mechanisms underlying φ and θA

.... Is empirical validation possible?

0,2 0,4 0,6 0,8 1 1,2 0,04 0,08 0,12 0,16 0,2 theta_A unemployed assisted search|a=1

φ=0 θA