Estimating Poverty Persistence In Britain

This paper uses longitudinal data from the BHPS, waves 1-8, to document low-income dynamics and persistence for individuals living in Britain in the 1990s. Poverty exit and reentry rates are estimated and the resulting distribution of time spent in poverty is calculated, both in single and in multiple-spells frameworks. Poverty persistence predictions are also produced for various subgroups of the populations. To do this, I estimate a multiple-spell model of transitions in and out of poverty, controlling for observed and correlated unobserved individual heterogeneity and for a potential initial condition problem. Components-of-variance models are also used to predict the number of years in poverty for the targeted groups. The two sets of predictions are then compared.