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Effectiveness of poverty reduction in the EU: A descriptive analysis

  • Caminada, Koen
  • Goudswaard, Kees

The European Union coordinates and encourages Member State actions to combat poverty, and to reform their social protection systems on the basis of policy exchanges and mutual learning (‘best practices’). Some EU countries are more effective in poverty reduction than others. What can explain these variations in effectiveness? This paper analyses the effectiveness of welfare state policies and especially social transfers in EU-countries in alleviating poverty. To indicate whether European economic integration may have had any impact on poverty reduction, we also include several non-EU15 countries as a benchmark into our analysis. We analyze on a cross-country basis the relationship between poverty rates and social effort, as measured by social expenditure ratios. We also correct these expenditure ratios for the impact of the tax system and for private social arrangements, using OECD methodology. Next, we compare poverty rates at the levels of market and disposable incomes, that is before and after transfers, in order to analyze the effect of tax and transfer policies in reducing poverty, i.e. to determine the target efficiency of social transfers. We perform several tests with the most recent data (LIS, OECD SOCX, and Eurostat: ECHP/EU-SILC). Our results are less clear cut than earlier findings. We still find a quite strong negative relationship between the level of social expenditure and poverty among OECD countries. However, for EU-countries this relationship is weaker and there are substantial differences within the EU15. After correcting for the impact of taxes and for private social arrangements, the linkage between social effort and poverty levels becomes even weaker. Also, we do not find a strong relationship between levels of social spending and antipoverty effects of social transfers and taxes. At the program level, family programs and child support alleviate poverty to a large extent.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20167.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:20167
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  1. Tony Atkinson, 2002. "Social Inclusion and the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 40(4), pages 625-643, November.
  2. Koen Caminada & Kees Goudswaard, 2005. "Are Public and Private Social Expenditures Complementary?," International Advances in Economic Research, International Atlantic Economic Society, vol. 11(2), pages 175-189, May.
  3. Michael Förster & Mark Pearson, 2002. "Income Distribution and Poverty in the OECD Area: Trends and Driving Forces," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 7-38.
  4. Andrea Brandolini, 2007. "Measurement of income distribution in supranational entities: the case of the European Union," Temi di discussione (Economic working papers) 623, Bank of Italy, Economic Research and International Relations Area.
  5. Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.
  6. Willem Adema, 2001. "Net Social Expenditure: 2nd Edition," OECD Labour Market and Social Policy Occasional Papers 52, OECD Publishing.
  7. Gottschalk, Peter & Smeeding, Timothy M., 2000. "Empirical evidence on income inequality in industrialized countries," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 5, pages 261-307 Elsevier.
  8. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  9. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
  10. Pestieau, Pierre, 2005. "The Welfare State in the European Union: Economic and Social Perspectives," OUP Catalogue, Oxford University Press, number 9780199261024, July.
  11. Jantti, Markus & Danziger, Sheldon, 2000. "Income poverty in advanced countries," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 6, pages 309-378 Elsevier.
  12. Koen Caminada & Kees Goudswaard, 2001. "International Trends in Income Inequality and Social Policy," International Tax and Public Finance, Springer, vol. 8(4), pages 395-415, August.
  13. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  14. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, July.
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