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The determinants of poverty transitions in Europe and the role of duration dependence

  • Andriopoulou, Eirini
  • Tsakloglou, Panagiotis

The paper examines the mobility into and out of poverty and identifies the determinants of poverty spell beginnings and endings in 14 European Countries for the period 1994-2000, using the European Community Household Panel. The first part of the paper offers a snapshot of poverty mobility in Europe calculating the entry and exit poverty rates, along with the conditional, to the duration of spell, exit probabilities and re-entry rates to poverty. In the second part observed characteristics of the household and the household head are examined in order to identify the determinants of the transitions into and out of poverty, taking into account unobserved heterogeneity across individuals and duration dependence. Multivariate discrete hazard analysis is used and the duration dependence is captured with time dummies. In almost all the 14 EU Member-States examined, the probability of exiting (re-entering) poverty is inversely related to the duration of the poverty (non-poverty) spell. The effect is significant to the inclusion of variables capturing observed heterogeneity (socioeconomic characteristics of the household head and the household and particular employment and demographic events), as well as to the inclusion of a random effects factor capturing the unobserved heterogeneity across individuals. With regards to the socio-economic variables, in most countries, households headed by young or elderly individuals, as well as households with dependent children are in higher risk of staying longer in poverty. In many cases, event variables improve the model significantly and highlight the mechanisms that bring individuals into and out of poverty.

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File URL: http://mpra.ub.uni-muenchen.de/30659/1/MPRA_paper_30659.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30659.

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Date of creation: 03 May 2011
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Handle: RePEc:pra:mprapa:30659
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  1. Van Kerm, Philippe, 2004. "Une évaluation économétrique des flux vers et hors de la pauvreté en Belgique," IRISS Working Paper Series 2004-04, IRISS at CEPS/INSTEAD.
  2. Devicienti, Francesco, 2001. "Poverty persistence in Britain: a multivariate analysis using the BHPS, 1991-1997," ISER Working Paper Series 2001-02, Institute for Social and Economic Research.
  3. Biewen, Martin, 2003. "Who Are the Chronic Poor? Evidence on the Extent and the Composition of Chronic Poverty in Germany," IZA Discussion Papers 779, Institute for the Study of Labor (IZA).
  4. Olga Cantó, 2003. "Finding out the Routes to Escape Poverty: The Relevance of Demographic vs. Labor Market Events in Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 569-588, December.
  5. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2004. "Employment, Family Union, and Childbearing Decisions in Great Britain," CASE Papers 084, Centre for Analysis of Social Exclusion, LSE.
  6. Francesco Devicienti & Valentina Gualtieri & Mariacristina Rossi, 2010. "The Dynamics and Persistence of Poverty: Evidence from Italy," Carlo Alberto Notebooks 173, Collegio Carlo Alberto.
  7. Lorenzo Cappellari & Stephen P. Jenkins, 2002. "Modelling Low Income Transitions," Discussion Papers of DIW Berlin 288, DIW Berlin, German Institute for Economic Research.
  8. Ambra Poggi, 2003. "Does persistence of social exclusion exist in Spain?," Working Papers wpdea0308, Department of Applied Economics at Universitat Autonoma of Barcelona.
  9. Aassve, Arnstein & Burgess, Simon & Dickson, Matt & Propper, Carol, 2005. "Modelling poverty by not modelling poverty: an application of a simultaneous hazards approach to the UK," ISER Working Paper Series 2005-26, Institute for Social and Economic Research.
  10. Signe-Mary McKernan & Caroline Ratcliffe, 2005. "Events that Trigger Poverty Entries and Exits," Social Science Quarterly, Southwestern Social Science Association, vol. 86(s1), pages 1146-1169.
  11. Philippe Kerm, 2002. "How much low income turnover is there in Belgium?," Journal of Economics, Springer, vol. 9(1), pages 341-363, December.
  12. Ondrich, Jan & Rhody, Stephen E., 1999. "Multiple spells in the Prentice-Gloeckler-Meyer likelihood with unobserved heterogeneity," Economics Letters, Elsevier, vol. 63(2), pages 139-144, May.
  13. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  14. Muffels, Ruud & Fouarge, Didier & Dekker, Ronald, 2000. "Longitudinal Poverty and Income Inequality A Comparative Panel Study for The Netherlands, Germany and the UK," MPRA Paper 13298, University Library of Munich, Germany.
  15. Annelies Debels & Leen Vandecasteele, 2008. "The Time Lag In Annual Household-Based Income Measures: Assessing And Correcting The Bias," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(1), pages 71-88, 03.
  16. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  17. Hansen, Jörgen & Wahlberg, Roger, 2004. "Poverty Persistence in Sweden," IZA Discussion Papers 1209, Institute for the Study of Labor (IZA).
  18. Ann Huff Stevens, 1999. "Climbing out of Poverty, Falling Back in: Measuring the Persistence of Poverty Over Multiple Spells," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 557-588.
  19. Pablo Antolín & Thai-Thanh Dang & Howard Oxley, 1999. "Poverty Dynamics in Four OECD Countries," OECD Economics Department Working Papers 212, OECD Publishing.
  20. Stephen P. Jenkins & Christian Schluter & Gert G. Wagner, 2001. "The Dynamics of Child Poverty: Britain and Germany Compared," Discussion Papers of DIW Berlin 233, DIW Berlin, German Institute for Economic Research.
  21. Sarah Jarvis & Stephen P. Jenkins, 1997. "Low income dynamics in 1990s Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 18(2), pages 123-142, May.
  22. Ross Finnie & Arthur Sweetman, 2003. "Poverty dynamics: empirical evidence for Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 291-325, May.
  23. Duncan, Greg J, et al, 1993. "Poverty Dynamics in Eight Countries," Journal of Population Economics, Springer, vol. 6(3), pages 215-34.
  24. Mary Jo Bane & David T. Ellwood, 1986. "Slipping into and out of Poverty: The Dynamics of Spells," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 1-23.
  25. Stephen P. Jenkins & Christian Schluter, 2003. "Why Are Child Poverty Rates Higher in Britain than in Germany?: A Longitudinal Perspective," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
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