Social income transfers and poverty alleviation in OECD countries
Poverty alleviation is an important policy objective in developed welfare states. This paper analyzes the effect of social transfer policies on poverty. A vast literature claims that high social effort goes along with low poverty levels across countries. This paper systematically analyzes this claim. We employ several social expenditure ratios (as a proxy for social effort) and correct for the impact of the tax system and for private social arrangements, using OECD methodology. Also, we control for demographic and macro-economic differences across countries. We performed several tests with the most recent data (LIS, OECD, and SOCX) for the period 1985-2005. Our results are less clear-cut than earlier findings. We still find quite a strong negative relationship between the level of public social expenditure and poverty among 28 OECD countries. However, for non-EU15 countries this relationship is stronger than for the EU15. The results alter considerably if private social expenditures are included as well. For non-EU15 countries in our sample, we do not find evidence for a negative correlation between the level of total social spending and the incidence of poverty. In contrast, for the group of EU15 countries private social arrangements do matter as far as poverty alleviation is concerned. Demographic and macro-economic (control) variables are important as well. We developed and employed multiple linear regression models to control for these complex interrelationships. Our results point at one direction: gross social spending is the driving force as far as differences in poverty levels across countries are concerned, although the ageing of the population and unemployment rates have some explanatory power, both for non-EU15 countries and for EU15 countries. Our analyses captures another effect as well. It is essential to control for the impact of taxes on the social expenditure ratios used. By doing so, the linkage between social effort and poverty levels across countries becomes insignificant. In view of the fact that with these corrections on expenditure statistics, we have a much better – although still not perfect - measure of what governments really devote to social spending, the familiar claim that higher social expenditure goes along with lower poverty levels does not hold across the 28 examined countries examined. We believe that our comparison of the impact of several social expenditure ratios on poverty levels has emphasized that taking into account both the public/private-mix and the impact of the tax system on social expenditure ratios really matters for comparative welfare state research and for policy makers who want to reduce poverty.
|Date of creation:||2010|
|Date of revision:|
|Publication status:||Published in Department of Economics Research Memorandum 2010.01 (2010): pp. 1-41|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, May.
- 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.
- Timothy Smeeding, 2006. "Poor People in Rich Nations: The United States in Comparative Perspective," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 69-90, Winter.
- Willem Adema, 2001. "Net Social Expenditure: 2nd Edition," OECD Labour Market and Social Policy Occasional Papers 52, OECD Publishing.
- Caminada, Koen & Goudswaard, Kees, 2001.
"International trends in income inequality and social policy,"
20181, University Library of Munich, Germany.
- 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.
- van Praag, Bernard M S & Hagenaars, Aldi J M & van Weeren, Hans, 1982. "Poverty in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 28(3), pages 345-59, September.
- 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.
- Tony Atkinson, 2002. "Social Inclusion and the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 40(4), pages 625-643, November.
- Castles, Francis G., 2004. "The Future of the Welfare State: Crisis Myths and Crisis Realities," OUP Catalogue, Oxford University Press, number 9780199273928, May.
- Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
- Notten, Geranda & Neubourg, Chris de, 2007. "Relative or absolute poverty in the US and EU? The battle of the rates," MPRA Paper 5313, University Library of Munich, Germany, revised 15 May 2007.
- 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.
- 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.
- 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.
- Martin, Megan & Caminada, Koen, 2009. "Welfare reform in the United States. A descriptive policy analysis," MPRA Paper 20139, University Library of Munich, Germany.
- Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
- Caminada, Koen & Goudswaard, Kees, 2009. "Social expenditure and poverty reduction in the EU15 and other OECD countries," MPRA Paper 20138, University Library of Munich, Germany.
- Anthony C. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Working Paper Series 881, CESifo Group Munich.
- Van Vliet, Olaf & Kaeding, Michael, 2007. "Globalisation, European Integration and Social Protection – Patterns of Change or Continuity?," MPRA Paper 20808, University Library of Munich, Germany.
- Caminada, Koen & Goudswaard, Kees, 2008. "Effectiveness of poverty reduction in the EU: A descriptive analysis," MPRA Paper 20167, University Library of Munich, Germany.
- 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.
- A. B. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Economic Studies, CESifo, vol. 49(4), pages 479-513.
- Andrea Brandolini & Timothy M. Smeeding, 2007. "Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes," CHILD Working Papers wp08_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
- repec:kap:iaecre:v:11:y:2005:i:2:p:175-189 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:20733. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.