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Government effectiveness, middle class and poverty in the EU: A dynamic multilevel analysis

Listed author(s):
  • Bruno, Bosco
  • Ambra, Poggi
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    Using the 2008-2011 EU-Statistics on Income and Living Conditions data, we implement a dynamic three-level model to analyze poverty persistence in 26 EU countries. Our aim is to understand why an individual experiencing poverty today is much more likely to experience it again. We innovate with respect to the existing literature by disentangling the effects of observed and unobserved heterogeneity at country level on the process that may generate poverty persistence. In particular, after controlling for socio-economic factors, including those related to qualitative and quantitative indicators of the welfare state, we analyze for the first time how the size of the middle class in each country affects current individual risk of poverty and its dynamics. Our findings show that the risk of poverty is negatively related to the quality of government activity to social expenditure and to the size of the middle class. Similarly, we show that the impact of past records on current poverty levels may be stronger (weaker) when institutional quality is low (high). This also indicates that good institutions and satisfactory social expenditure may help reducing the adverse current and future impact of experiencing poverty for any level of per capita income and middle class size. Policy implications are also discussed.

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    Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 344.

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    Length: 27
    Date of creation: 27 Jun 2016
    Date of revision: 27 Jun 2016
    Handle: RePEc:mib:wpaper:344
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    1. Eirini Andriopoulou & Panagiotis Tsakloglou, "undated". "The determinants of poverty transitions in Europe and the role of duration dependence," DEOS Working Papers 1119, Athens University of Economics and Business.
    2. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 53-72, April.
    3. Lane Kenworthy, 1998. "Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment," LIS Working papers 188, LIS Cross-National Data Center in Luxembourg.
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