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Once Poor, Always Poor? Do Initial Conditions Matter? Evidence from the ECHP

In: Measurement of Poverty, Deprivation, and Economic Mobility

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  • Eirini Andriopoulou
  • Panos Tsakloglou

Abstract

The paper analyses the effects of individual and household characteristics on current poverty status, while controlling for initial conditions, past poverty status and unobserved heterogeneity in 14 European countries for the period 1994–2001, using the European Community Household Panel. The distinction between true state dependence and individual heterogeneity has important policy implications, since if the former is the main cause of poverty it may be crucial to break the ‘vicious circle’ of poverty using income-supporting social policies, whereas if it is the latter anti-poverty policies should focus primarily on education, training, development of personal skills and other labour market oriented policies. The empirical results are similar in qualitative terms but rather different in quantitative terms across the EU countries covered in the paper. State dependence remains significant in all model specifications, even after controlling for unobserved heterogeneity or when removing possible endogeneity bias. Higher poverty rates and higher poverty persistence are associated with particular welfare state regimes, although the link is substantially weakened when other explanatory variables are included in the analysis.

Suggested Citation

  • Eirini Andriopoulou & Panos Tsakloglou, 2015. "Once Poor, Always Poor? Do Initial Conditions Matter? Evidence from the ECHP," Research on Economic Inequality, in: Thesia I. Garner & Kathleen S. Short (ed.),Measurement of Poverty, Deprivation, and Economic Mobility, volume 23, pages 23-70, Emerald Publishing Ltd.
  • Handle: RePEc:eme:reinzz:s1049-258520150000023002
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    References listed on IDEAS

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    1. Alberto Plazzi & Walter Torous & Rossen Valkanov, 2010. "Expected Returns and Expected Growth in Rents of Commercial Real Estate," Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3469-3519.
    2. John F. Henry & L. Randall Wray, 1998. "Economic Time," Macroeconomics 9811004, University Library of Munich, Germany.
    3. Castrén, Olli & Fitzpatrick, Trevor & Sydow, Matthias, 2006. "What drives EU banks' stock returns? Bank-level evidence using the dynamic dividend-discount model," Working Paper Series 677, European Central Bank.
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    Citations

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    Cited by:

    1. Eirini Andriopoulou & Alexandros Karakitsios & Panos Tsakloglou, 2017. "Inequality and Poverty in Greece:Changes in Times of Crisis," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 116, Hellenic Observatory, LSE.
    2. Eirini Andriopoulou & Eleni Kanavitsa & Panos Tsakloglou, 2019. "Decomposing Poverty in Hard Times: Greece 2007-2016," Revue d’économie du développement, De Boeck Université, vol. 27(2), pages 125-168.
    3. Maciej Bukowski & Sonia Buchholtz & Piotr Lewandowski & Pawel Chrostek & Agnieszka Kaminska & Maciej Lis & Monika Potoczna & Michal Myck & Michal Kundera & Monika Oczkowska, 2013. "Employment in Poland 2011. Poverty and Jobs," Books and Reports published by IBS, Instytut Badan Strukturalnych, number zwp2011 edited by Maciej Bukowski & Iga Magda, january.
      • Magda, Iga & Bukowski, Maciej & Buchholz, Sonia & Lewandowski, Piotr & Chrostek, Paweł & Kamińska, Agnieszka & Lis, Maciej & Potoczna, Monika & Myck, Michał & Kundera, Michał & Oczkowska, Monika, 2013. "Employment in Poland 2011 - Poverty and jobs," MPRA Paper 50185, University Library of Munich, Germany.
    4. Marjan Maes, 2013. "Poverty persistence among the elderly in the transition from work to retirement," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 35-56, March.
    5. Raluca Iorgulescu, 2014. "Poverty, Well-Being And Sustainable Development: Official And Experimental Measures In Postmodern Societies," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 34-41, February.
    6. Carlos Gradín & Olga Cantó, 2009. "Why are child poverty rates so persistently high in Spain?," Working Papers 123, ECINEQ, Society for the Study of Economic Inequality.
    7. REINSTADLER Anne & RAY Jean-Claude, 2010. "Macro Determinants of Individual Income Poverty in 93 Regions of Europe," LISER Working Paper Series 2010-13, LISER.

    More about this item

    Keywords

    Poverty dynamics; state-dependence; initial conditions; EU; I32; I38;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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