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The relationship between social transfers and poverty reduction: A nonparametric approach for the EU-27

Author

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  • Nuno Baetas da Silva

    (Faculdade de Economia da Universidade de Coimbra, Grupo de Estudos Monetários e Financeiros (GEMF))

  • João Sousa Andrade

    (Faculdade de Economia da Universidade de Coimbra, Grupo de Estudos Monetários e Financeiros (GEMF))

Abstract

Poverty reduction is one of the most important goals of developed welfare states. Among others, expenditures on social transfers consist in an important instrument for that goal. Using a nonparametric panel data model for the EU-27, for the period 2003-2013, this article studies the role of social transfers in combating poverty, allowing for the detection of saturation points and structural breaks between periods. Controlling for demographic and economic conditions specific to each country, we find a positive relationship between poverty gains and social transfers for values below 27% of GDP. Above that saturation point, expenditures on social transfers describe a situation of total inefficiency. The results suggest that Finland, Hungary and Luxembourg are the most efficient countries in reducing poverty via social transfers, whereas Greece, Portugal and Spain are the least efficient among the EU-27. We also conclude that social transfers are less efficient in the crisis period (2008-2013).

Suggested Citation

  • Nuno Baetas da Silva & João Sousa Andrade, 2016. "The relationship between social transfers and poverty reduction: A nonparametric approach for the EU-27," GEMF Working Papers 2016-09, GEMF, Faculty of Economics, University of Coimbra.
    • Handle: RePEc:gmf:wpaper:2016-09.
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    References listed on IDEAS

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    Cited by:

    1. Ivana Velkovska & Borce Trenovski, 2023. "Economic growth or social expenditure: what is more effective in decreasing poverty and income inequality in the EU - a panel VAR approach," Public Sector Economics, Institute of Public Finance, vol. 47(1), pages 111-142.

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    More about this item

    Keywords

    Poverty measure; social transfers; efficiency and nonparametric econometrics. JEL Classification: C14; D61; H55; I3;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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