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Poverty and the business cycle: The role of the intra-household distribution of unemployment

Author

Listed:
  • Luis Ayala

    (Universidad Rey Juan Carlos)

  • Olga Cantó

    (Instituto de Estudios Fiscales)

  • Juan G. Rodríguez

    (Universidad Complutense de Madrid)

Abstract

Conventional wisdom predicts that changes in the aggregate unemployment rate may significantly affect a country’s income distribution and, as a consequence, have a relevant impact on the evolution of the poverty rate. However, the relationship between labour macroeconomic indicators and poverty seems to have become weaker in recent times. Using panel data on unemployment and poverty for Spanish regions we estimate a System GMM model in order to model this relationship taking into account that the intrahousehold distribution of unemployment can be more relevant than aggregate unemployment in order to explain poverty changes. We also test the hypothesis of asymmetric effects of the business cycle on the share of poor individuals in the population. Our results show that unemployment has a positive impact on severe poverty, while inflation has a negative effect. Among the three unemployment measures considered in order to predict poverty, the percentage of households where all active members are unemployed registers the highest explanatory power. We also find that a change in unemployment has a larger effect on poverty during a period of economic recession than during a period of expansion.

Suggested Citation

  • Luis Ayala & Olga Cantó & Juan G. Rodríguez, 2011. "Poverty and the business cycle: The role of the intra-household distribution of unemployment," Working Papers 222, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2011-222
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    References listed on IDEAS

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    Cited by:

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    2. Jesús Ruiz-Huerta Carbonell & Rosa María Martínez López, 2014. "Multidimensional poverty in immigrant households: a comparative analysis within the Europe 2020 framework," CIRANO Working Papers 2014s-18, CIRANO.
    3. Gonzalo Paz Pardo & José Manuel Sánchez Santos, 2014. "Household Debt and Consumption Inequality: The Spanish Case," Economies, MDPI, Open Access Journal, vol. 2(3), pages 1-24, July.
    4. Amuedo-Dorantes Catalina & Borra Cristina, 2017. "Retirement Decisions in Recessionary Times: Evidence from Spain," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(2), pages 1-21, April.
    5. Luis Ayala Cañón & Ángela Triguero Cano, 2017. "Economic Downturns, Endogenous Government Policy and Welfare Caseloads," Hacienda Pública Española / Review of Public Economics, IEF, vol. 220(1), pages 107-136, March.

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    More about this item

    Keywords

    poverty forecasting; unemployment; system GMM model;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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