The Relationship between Labor Market Conditions and Welfare Receipt in Australia : A Stock-Flow Analysis

This paper estimates the role of labor market condi tions in the recent decline in welfare receipt among the working age population in Austral ia. A stock-flow model is used, which involves modeling the underlying welfare flows and using the results to simulate the effect of labor market conditions on the welfare stock. The s imulation analysis suggests that improvements in the labor market explain the majori ty of the decline. A range of robustness checks are undertaken including using alternative l e ls of geographic disaggregation to deal with likely measurement error in labor market data. JEL classifications: C59, J11, I38. + This paper is derived from my PhD thesis. I am ind ebted to my supervisors Jeff Borland, John Creedy and Lixin Cai for their constructive gu idance. Thanks are also due to Paul Miller, Richard Disney, Tue Gorgens, Joshua Chan an d Cain Polidano for their invaluable comments. I acknowledge the Commonwealth Department of Education, Employment and Workplace Relation (DEEWR) for the sample of the LD S data and the assistance provided in using the sample. The research findings and the vie ws expressed in this paper are my own, and should not be attributed to the Commonwealth de partment.