The Dynamics and Persistence of Poverty: Evidence from Italy

This article studies the dynamics and persistence of poverty in Italy during the nineties, using the ECHP, 1994-2001. Various definitions of poverty are analyzed in parallel, income poverty, subjective poverty and a multidimensional index of life-style deprivation. For each poverty definition, the hazard rates of leaving poverty and re-entering into it are estimated and combined to compute a measure of poverty persistence that takes account of individuals’ repeated spells in poverty. The estimates provide a picture of high poverty turnover for the majority of the Italian population, which is true for any of the alternative definitions of poverty considered. Thus movements in and out of poverty cannot be simply related to spurious transitions due to measurement errors in household income. Multivariate exit and re-entry rate regressions are then estimated jointly to allow for correlated unobserved heterogeneity. The results highlight the role of demographic characteristics, the insufficiencies of the existing social security system and, above all, the weaknesses of the Italian labor market in generating persistent poverty for certain subgroups of the population.