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The determinants of poverty transitions in Europe and the role of duration dependence

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  • Eirini Andriopoulou

    ()
    (Hellenic Competition Commission)

  • Panagiotis Tsakloglou

    ()
    (Athens University of Economics and Business)

Abstract

The paper examines the mobility into and out of poverty and identifies the determinants of poverty spell beginnings and endings in 14 European Countries for the period 1994-2000, using the European Community Household Panel. The first part of the paper offers a snapshot of poverty mobility in Europe calculating the entry and exit poverty rates, along with the conditional, to the duration of spell, exit probabilities and re-entry rates to poverty. In the second part observed characteristics of the household and the household head are examined in order to identify the determinants of the transitions into and out of poverty, taking into account unobserved heterogeneity across individuals and duration dependence. Multivariate discrete hazard analysis is used and the duration dependence is captured with time dummies. In almost all the 14 EU Member-States examined, the probability of exiting (re-entering) poverty is inversely related to the duration of the poverty (non-poverty) spell. The effect is significant to the inclusion of variables capturing observed heterogeneity (socioeconomic characteristics of the household head and the household and particular employment and demographic events), as well as to the inclusion of a random effects factor capturing the unobserved heterogeneity across individuals. With regards to the socio-economic variables, in most countries, households headed by young or elderly individuals, as well as households with dependent children are in higher risk of staying longer in poverty. In many cases, event variables improve the model significantly and highlight the mechanisms that bring individuals into and out of poverty.

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Bibliographic Info

Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1119.

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Length: 38 pages
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Handle: RePEc:aue:wpaper:1119

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Keywords: Poverty dynamics; EU;

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References

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  1. repec:ese:iserwp:99-23 is not listed on IDEAS
  2. Martin Biewen, 2003. "Who Are the Chronic Poor?: Evidence on the Extent and the Composition of Chronic Poverty in Germany," Discussion Papers of DIW Berlin 350, DIW Berlin, German Institute for Economic Research.
  3. Ondrich, Jan & Rhody, Stephen E., 1999. "Multiple spells in the Prentice-Gloeckler-Meyer likelihood with unobserved heterogeneity," Economics Letters, Elsevier, Elsevier, vol. 63(2), pages 139-144, May.
  4. Ann Huff Stevens, 1999. "Climbing out of Poverty, Falling Back in: Measuring the Persistence of Poverty Over Multiple Spells," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 557-588.
  5. Arnstein Aassve & Simon Burgess & Carol Propper & Matt Dickson, 2004. "Employment, family union, and childbearing decisions in Great Britain," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 6306, London School of Economics and Political Science, LSE Library.
  6. Philippe Kerm, 2002. "How much low income turnover is there in Belgium?," Journal of Economics, Springer, Springer, vol. 77(1), pages 341-363, December.
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  8. Sarah Jarvis & Stephen P. Jenkins, 1997. "Low income dynamics in 1990s Britain," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 18(2), pages 123-142, May.
  9. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2005. "Modelling Poverty by not Modelling Poverty: An Application of a Simultaneous Hazards Approach to the UK," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 05/134, Department of Economics, University of Bristol, UK.
  10. Hansen, Jörgen & Wahlberg, Roger, 2004. "Poverty Persistence in Sweden," IZA Discussion Papers 1209, Institute for the Study of Labor (IZA).
  11. Francesco Devicienti & Valentina Gualtieri & Mariacristina Rossi, 2010. "The Dynamics and Persistence of Poverty: Evidence from Italy," Carlo Alberto Notebooks, Collegio Carlo Alberto 173, Collegio Carlo Alberto.
  12. Muffels, Ruud & Fouarge, Didier & Dekker, Ronald, 2000. "Longitudinal Poverty and Income Inequality A Comparative Panel Study for The Netherlands, Germany and the UK," MPRA Paper 13298, University Library of Munich, Germany.
  13. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  14. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," Journal of Economic Inequality, Springer, Springer, vol. 5(1), pages 53-72, April.
  15. repec:ese:iserwp:2002-08 is not listed on IDEAS
  16. Stephen P. Jenkins & Christian Schluter & Gert G. Wagner, 2001. "The Dynamics of Child Poverty: Britain and Germany Compared," Discussion Papers of DIW Berlin 233, DIW Berlin, German Institute for Economic Research.
  17. Duncan, Greg J, et al, 1993. "Poverty Dynamics in Eight Countries," Journal of Population Economics, Springer, Springer, vol. 6(3), pages 215-34.
  18. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  19. Ross Finnie & Arthur Sweetman, 2003. "Poverty dynamics: empirical evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 36(2), pages 291-325, May.
  20. Annelies Debels & Leen Vandecasteele, 2008. "The Time Lag In Annual Household-Based Income Measures: Assessing And Correcting The Bias," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(1), pages 71-88, 03.
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  22. Cappellari, Lorenzo & Jenkins, Stephen P., 2002. "Modelling Low Income Transitions," IZA Discussion Papers 504, Institute for the Study of Labor (IZA).
  23. Mary Jo Bane & David T. Ellwood, 1986. "Slipping into and out of Poverty: The Dynamics of Spells," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 1-23.
  24. Stephen P. Jenkins & Christian Schluter, 2003. "Why Are Child Poverty Rates Higher in Britain than in Germany?: A Longitudinal Perspective," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
  25. Pablo Antolín & Thai-Thanh Dang & Howard Oxley, 1999. "Poverty Dynamics in Four OECD Countries," OECD Economics Department Working Papers 212, OECD Publishing.
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Cited by:
  1. JENKINS Stephen P. & VAN KERM Philippe, 2012. "The relationship between EU indicators of persistent and current poverty," CEPS/INSTEAD Working Paper Series 2012-43, CEPS/INSTEAD.
  2. Sèna Kimm Gnangnon, 2012. "An analysis of duration dependence of government revenue expansions and contractions in Developing Countries," Working Papers halshs-00722083, HAL.
  3. repec:ese:iserwp:2011-30 is not listed on IDEAS
  4. repec:cep:sticas:case169 is not listed on IDEAS

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