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Effectiveness of poverty reduction in the EU: A descriptive analysis

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  • Caminada, Koen
  • Goudswaard, Kees

Abstract

The European Union coordinates and encourages Member State actions to combat poverty, and to reform their social protection systems on the basis of policy exchanges and mutual learning (‘best practices’). Some EU countries are more effective in poverty reduction than others. What can explain these variations in effectiveness? This paper analyses the effectiveness of welfare state policies and especially social transfers in EU-countries in alleviating poverty. To indicate whether European economic integration may have had any impact on poverty reduction, we also include several non-EU15 countries as a benchmark into our analysis. We analyze on a cross-country basis the relationship between poverty rates and social effort, as measured by social expenditure ratios. We also correct these expenditure ratios for the impact of the tax system and for private social arrangements, using OECD methodology. Next, we compare poverty rates at the levels of market and disposable incomes, that is before and after transfers, in order to analyze the effect of tax and transfer policies in reducing poverty, i.e. to determine the target efficiency of social transfers. We perform several tests with the most recent data (LIS, OECD SOCX, and Eurostat: ECHP/EU-SILC). Our results are less clear cut than earlier findings. We still find a quite strong negative relationship between the level of social expenditure and poverty among OECD countries. However, for EU-countries this relationship is weaker and there are substantial differences within the EU15. After correcting for the impact of taxes and for private social arrangements, the linkage between social effort and poverty levels becomes even weaker. Also, we do not find a strong relationship between levels of social spending and antipoverty effects of social transfers and taxes. At the program level, family programs and child support alleviate poverty to a large extent.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20167.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:20167

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Keywords: poverty; welfare states; Lisbon objectives; social indicators;

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References

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  1. Koen Caminada & Kees Goudswaard, 2005. "Are Public and Private Social Expenditures Complementary?," International Advances in Economic Research, Springer, Springer, vol. 11(2), pages 175-189, May.
  2. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(2), pages 633-687, June.
  3. Andrea Brandolini, 2007. "Measurement of income distribution in supranational entities: the case of the European Union," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 623, Bank of Italy, Economic Research and International Relations Area.
  4. Michael Förster & Mark Pearson, 2002. "Income Distribution and Poverty in the OECD Area: Trends and Driving Forces," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2002(1), pages 7-38.
  5. Koen Caminada & Kees Goudswaard, 2001. "International Trends in Income Inequality and Social Policy," International Tax and Public Finance, Springer, Springer, vol. 8(4), pages 395-415, August.
  6. Willem Adema, 2001. "Net Social Expenditure: 2nd Edition," OECD Labour Market and Social Policy Occasional Papers, OECD Publishing 52, OECD Publishing.
  7. Jantti, Markus & Danziger, Sheldon, 2000. "Income poverty in advanced countries," Handbook of Income Distribution, Elsevier, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 6, pages 309-378 Elsevier.
  8. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(3), pages 771-799, September.
  9. Tony Atkinson, 2002. "Social Inclusion and the European Union," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(4), pages 625-643, November.
  10. Gottschalk, Peter & Smeeding, Timothy M., 2000. "Empirical evidence on income inequality in industrialized countries," Handbook of Income Distribution, Elsevier, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 5, pages 261-307 Elsevier.
  11. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199253494, October.
  12. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 749-64, July.
  13. Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.
  14. Pestieau, Pierre, 2005. "The Welfare State in the European Union: Economic and Social Perspectives," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199261024, October.
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Citations

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Cited by:
  1. Caminada, Koen & Goudswaard, Kees & Koster, Ferry, 2010. "Social Income Transfers and Poverty Alleviation in OECD Countries," MPRA Paper 27345, University Library of Munich, Germany.
  2. Heshmati, Almas & Kim, Jungsuk, 2014. "A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth," IZA Discussion Papers 8119, Institute for the Study of Labor (IZA).
  3. Wang, Chen & Caminada, Koen, 2011. "Disentangling income inequality and the redistributive effect of social transfers and taxes in 36 LIS countries," MPRA Paper 32821, University Library of Munich, Germany.
  4. Caminada, Koen & Goudswaard, Kees & Wang, Chen, 2012. "Disentangling income inequality and the redistributive effect of taxes and transfers in 20 LIS countries over time," MPRA Paper 42350, University Library of Munich, Germany.

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