The dynamics of social assistance benefit receipt in Luxembourg – a descriptive analysis

This study provides a descriptive analysis of the dynamics of social assistance benefit receipt in Luxembourg based on data from two administrative sources. In a first part, we use annual data for the years 2001 – 2009 to describe recipiency rates and benefit transitions for the Guaranteed Minimum Income (RMG) and the Heating Allowance / Cost of Living Allowance (AC/AVC). In a second part, we study RMG benefit dynamics at the monthly level using data from administrative records for the years 1988 – 2010. We find that benefit recipiency has strongly risen over the period of observation. The equilibrium benefit recipiency rate as implied by the annual transition rates continues to remain higher than the observed frequency of benefit receipt. Our analysis of monthly benefit dynamics shows that persistence in RMG receipt is high, with 38% of all spells lasting longer than two years. Welfare recidivism in contrast does not appear to be widespread, with 85% of individuals in the sample having no more than two benefit spells.