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Understanding the drivers of low income transitions in Luxembourg

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  • FUSCO Alessio
  • ISLAM Nizamul

Abstract

We analyse the determinants of poverty transitions, defined as movements across a low income threshold, in Luxembourg. Data used are those from the Luxembourg socioeconomic panel ?Liewen zu Lëtzebuerg? (PSELL3) running from 2003 to 2009. Using an endogenous switching first-order Markov model, we control for potential endogeneity to low income transitions due to both initial condition and non random attrition. We find that employment protects from both remaining poor and entering poverty. In addition, attrition and initial low income are found to be endogenous processes with respect to low income transitions. Finally, genuine state dependence accounts for a substantial level of aggregate state dependence.

Suggested Citation

  • FUSCO Alessio & ISLAM Nizamul, 2012. "Understanding the drivers of low income transitions in Luxembourg," LISER Working Paper Series 2012-31, LISER.
  • Handle: RePEc:irs:cepswp:2012-31
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    References listed on IDEAS

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    Cited by:

    1. Alessio Fusco, 2016. "The Dynamics of Perceived Financial Difficulties," Journal of Happiness Studies, Springer, vol. 17(4), pages 1599-1614, August.
    2. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 103-114.
    3. Sara Ayllón, 2013. "Understanding poverty persistence in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 201-233, June.
    4. Sara Ayllón & András Gábos, 2017. "The Interrelationships between the Europe 2020 Poverty and Social Exclusion Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1025-1049, February.

    More about this item

    Keywords

    poverty dynamics; Luxembourg; Markov transitions models; attrition; initial conditions; state dependence;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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