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Improving poverty reduction in Europe: what works best where?

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  • Leventi, Chrysa
  • Sutherland, Holly
  • Tasseva, Iva Valentinova

Abstract

We provide evidence of the relative cost-effectiveness of different types of policy instrument in reducing poverty or limiting its increase, comparing within and between seven diverse EU countries. We do that by measuring the implications of increasing/reducing the instrument size within its national context, using microsimulation methods. We consider commonly-applied policy instruments with a direct effect on household income: child benefits, minimum income components of social assistance, income tax lower thresholds and minimum wages and a benchmark case of changing the size of the whole tax-benefit system. We find that the assessment of the most cost effective instrument may depend on the measure of poverty used and the direction and scale of the change. Nevertheless, our results indicate that the options that reduce poverty most cost-effectively in most countries are increasing child benefits and social assistance while reducing the former is a particularly poverty-increasing way of making budgetary cuts.

Suggested Citation

  • Leventi, Chrysa & Sutherland, Holly & Tasseva, Iva Valentinova, 2017. "Improving poverty reduction in Europe: what works best where?," EUROMOD Working Papers em8/17, EUROMOD at the Institute for Social and Economic Research.
  • Handle: RePEc:ese:emodwp:em8-17
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    References listed on IDEAS

    as
    1. Marchal, Sarah & Marx, Ive, 2015. "Stemming the Tide: What Have EU Countries Done to Support Low-Wage Workers in an Era of Downward Wage Pressures?," IZA Discussion Papers 9390, Institute for the Study of Labor (IZA).
    2. Diego Collado & Bea Cantillon & Karel Van den Bosch & Tim Goedemé & Dieter Vandelannoote, 2016. "The end of cheap talk about poverty reduction: the cost of closing the poverty gap while maintaining work incentives," ImPRovE Working Papers 16/08, Herman Deleeck Centre for Social Policy, University of Antwerp.
    3. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    4. Holly Sutherland & Ruth Hancock & John Hills & Francesca Zantomio, 2008. "Keeping up or Falling behind? The Impact of Benefit and Tax Uprating on Incomes and Poverty," Fiscal Studies, Institute for Fiscal Studies, vol. 29(4), pages 467-498, December.
    5. David Neumark & William Wascher, 2002. "Do Minimum Wages Fight Poverty?," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 315-333, July.
    6. Avram, Silvia & Figari, Francesco & Leventi, Chrysa & Levy, Horacio & Navicke, Jekaterina & Matsaganis, Manos & Militaru, Eva & Paulus, Alari & Rastrigina, Olga & Sutherland, Holly, 2013. "The distributional effects of fiscal consolidation in nine EU countries," EUROMOD Working Papers EM2/13, EUROMOD at the Institute for Social and Economic Research.
    7. Tasseva, Iva Valentinova, 2012. "Evaluating the performance of means-tested benefits in Bulgaria," ISER Working Paper Series 2012-18, Institute for Social and Economic Research.
    8. Natascha Van Mechelen & Sarah Marchal, 2013. "Trends and convergence of Europe’s minimum income schemes," ImPRovE Working Papers 13/11, Herman Deleeck Centre for Social Policy, University of Antwerp.
    9. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    10. Tasseva, Iva Valentinova, 2016. "Evaluating the performance of means-tested benefits in Bulgaria," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 919-935.
    11. Paola De Agostini & John Hills & Holly Sutherland, 2015. "Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government's tax-benefit policy changes: an end-of-term update," CASE - Social Policy in a Cold Climate Working Paper 22, Centre for Analysis of Social Exclusion, LSE.
    12. Francesco Figari & Carlo V. Fiorio, 2015. "Fiscal Consolidation Policies in the Context of Italy's Two Recessions," Fiscal Studies, Institute for Fiscal Studies, vol. 36, pages 499-526, December.
    13. Immervoll, Herwig & Pearson, Mark, 2009. "A Good Time for Making Work Pay? Taking Stock of In-Work Benefits and Related Measures across the OECD," IZA Policy Papers 3, Institute for the Study of Labor (IZA).
    14. Lane Kenworthy, 1998. "Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment," LIS Working papers 188, LIS Cross-National Data Center in Luxembourg.
    15. Immervoll, Herwig, 2009. "Minimum-Income Benefits in OECD Countries: Policy Design, Effectiveness and Challenges," IZA Discussion Papers 4627, Institute for the Study of Labor (IZA).
    16. Ravagli, Letizia, 2015. "A minimum income in Italy," EUROMOD Working Papers EM16/15, EUROMOD at the Institute for Social and Economic Research.
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    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D30 - Microeconomics - - Distribution - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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