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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 1120.

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Length: 38 pages
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Handle: RePEc:aue:wpaper:1120

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Keywords: Poverty dynamics; EU;

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References

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  1. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2004. "Employment, Family Union, and Childbearing Decisions in Great Britain," CASE Papers, Centre for Analysis of Social Exclusion, LSE 084, Centre for Analysis of Social Exclusion, LSE.
  2. 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.
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  4. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 411-45, March.
  5. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2006. "Modelling poverty by not modelling poverty: an application of a simultaneous hazards approach to the UK," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 6243, 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. 9(1), pages 341-363, December.
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  8. Ann Huff Stevens, 1995. "Climbing Out of Poverty, Falling Back In: Measuring the Persistence of Poverty over Multiple Spells," NBER Working Papers 5390, National Bureau of Economic Research, Inc.
  9. Olga Cantó, 2003. "Finding out the Routes to Escape Poverty: The Relevance of Demographic vs. Labor Market Events in Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 569-588, December.
  10. Signe-Mary McKernan & Caroline Ratcliffe, 2005. "Events that Trigger Poverty Entries and Exits," Social Science Quarterly, Southwestern Social Science Association, vol. 86(s1), pages 1146-1169.
  11. Pablo Antolín & Thai-Thanh Dang & Howard Oxley, 1999. "Poverty Dynamics in Four OECD Countries," OECD Economics Department Working Papers 212, OECD Publishing.
  12. 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).
  13. 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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  16. Duncan, Greg J, et al, 1993. "Poverty Dynamics in Eight Countries," Journal of Population Economics, Springer, Springer, vol. 6(3), pages 215-34.
  17. Ambra Poggi, 2003. "Does persistence of social exclusion exist in Spain?," Working Papers wpdea0308, Department of Applied Economics at Universitat Autonoma of Barcelona.
  18. Van Kerm, Philippe, 2004. "Une évaluation économétrique des flux vers et hors de la pauvreté en Belgique," IRISS Working Paper Series, IRISS at CEPS/INSTEAD 2004-04, IRISS at CEPS/INSTEAD.
  19. Francesco Devicienti & Valentina Gualtieri, 2007. "The Dynamics and Persistence of Poverty: Evidence from Italy," LABORatorio R. Revelli Working Papers Series 63, LABORatorio R. Revelli, Centre for Employment Studies.
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  21. Hansen, Jörgen & Wahlberg, Roger, 2004. "Poverty Persistence in Sweden," IZA Discussion Papers 1209, Institute for the Study of Labor (IZA).
  22. 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.
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  24. Francesco Devicienti, 2002. "Poverty persistence in Britain: A multivariate analysis using the BHPS, 1991–1997," Journal of Economics, Springer, Springer, vol. 9(1), pages 307-340, December.
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  27. repec:ese:iserwp:99-23 is not listed on IDEAS
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Citations

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Cited by:
  1. Stephen P Jenkins & Philippe Van Kerm, 2013. "The relationship between EU indicators of persistent and current poverty," CASE Papers, Centre for Analysis of Social Exclusion, LSE /169, Centre for Analysis of Social Exclusion, LSE.
  2. repec:cep:sticas:case169 is not listed on IDEAS
  3. repec:ese:iserwp:2011-30 is not listed on IDEAS
  4. Sèna Kimm Gnangnon, 2012. "An analysis of duration dependence of government revenue expansions and contractions in Developing Countries," Working Papers halshs-00722083, HAL.

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