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Understanding poverty persistence in Spain

  • Sara Ayllón

    ()

The aim of this paper is to study the mechanisms behind poverty persistence in Spain. We examine the importance of past poverty experiences for explaining current poverty as opposed to observed and unobserved individual heterogeneity. Our results are based on the model proposed by Cappellari and Jenkins (J Appl Econometr 19:593–610, 2004a ) that estimates poverty transitions while simultaneously controlling for attrition and initial conditions. We find that about 50% of aggregate state dependence is genuine: poverty in a given year increases in itself the chances of experiencing poverty again in the future. The remainder is explained, among other characteristics, by living with a head of household who has no educational qualifications, being an immigrant or cohabiting with teenagers. Our findings call for a comprehensive and coordinated strategy against poverty that should focus equally on income-support policies and on enhancing those characteristics that best protect against economic hardship. From a methodological point of view, we learn that unobservables affecting initial conditions and sample retention are exogenous to those related to poverty transience. However, results prove to be sensitive to the choice of poverty line. Copyright The Author(s) 2013

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File URL: http://hdl.handle.net/10.1007/s13209-012-0089-4
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Article provided by Springer & Spanish Economic Association in its journal SERIEs.

Volume (Year): 4 (2013)
Issue (Month): 2 (June)
Pages: 201-233

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Handle: RePEc:spr:series:v:4:y:2013:i:2:p:201-233
DOI: 10.1007/s13209-012-0089-4
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  1. Lorenzo Cappellari & Stephen P. Jemkins, 2002. "Who Stays Poor? Who Becomes Poor? Evidence from the British Household Panel Survey," Economic Journal, Royal Economic Society, vol. 112(478), pages C60-C67, March.
  2. Biewen, Martin, 2002. "The Covariance Structure of East and West German Incomes and its Implications for the Persistence of Poverty and Inequality," IZA Discussion Papers 459, Institute for the Study of Labor (IZA).
  3. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  4. 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 05/134, Department of Economics, University of Bristol, UK.
  5. FUSCO Alessio & ISLAM Nizamul, 2012. "Understanding the drivers of low income transitions in Luxembourg," LISER Working Paper Series 2012-31, LISER.
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  7. Martin Biewen, 2009. "Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1095-1116.
  8. Cheti Nicoletti & Franco Peracchi, 2005. "Survey response and survey characteristics: microlevel evidence from the European Community Household Panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(4), pages 763-781.
  9. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, Junio.
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  12. Jenkins, Stephen P., 2011. "Changing Fortunes: Income Mobility and Poverty Dynamics in Britain," OUP Catalogue, Oxford University Press, number 9780199226436, December.
  13. FAYE Ousmane & ISLAM Nizamul & ZULU Eliya, 2011. "Poverty dynamics in Nairobi's slums: testing for true state dependence and heterogeneity effects," LISER Working Paper Series 2011-56, LISER.
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  15. Nilsson, William, 2005. "Heterogeneity or True State Dependence in Poverty - The tale told by twins," Umeå Economic Studies 650, Umeå University, Department of Economics.
  16. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
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  19. Buddelmeyer, Hielke & Verick, Sher, 2007. "Understanding the Drivers of Poverty Dynamics in Australian Households," IZA Discussion Papers 2827, Institute for the Study of Labor (IZA).
  20. Jenkins, Stephen P. & Van Kerm, Philippe, 2011. "Patterns of persistent poverty: evidence from EU-SILC," ISER Working Paper Series 2011-30, Institute for Social and Economic Research.
  21. 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.
  22. Mark B. Stewart, 2007. "The interrelated dynamics of unemployment and low-wage employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 511-531.
  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. Luis Ayala & Carolina Navarro & Mercedes Sastre, . "Cross-Country Income Mobility Comparisons Under Panel Attrition: The Relevance Of Weighting Schemes," Working Papers 19-06 Classification-JEL , Instituto de Estudios Fiscales.
  25. Amuedo-Dorantes, Catalina & Serrano-Padial, Ricardo, 2010. "Labor market flexibility and poverty dynamics," Labour Economics, Elsevier, vol. 17(4), pages 632-642, August.
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