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Trends of Poverty and Income Inequality in Cross-National Comparison

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  • Veli-Matti Ritakallio

Abstract

Comparative research of poverty, income inequality and the effectiveness of income transfer systems has flourished during the last two decades, largely owing to the contribution of the Luxembourg Income Study project. So far, however, the majority of comparative analyses have been based on a single year. For this paper we analyzed cross-national patterns of poverty and income inequality with a special emphasis on their stability. We studied trends of poverty and income inequality between 1980 and 1995 in nine countries representing three different ideal types of social policy. The differences in poverty across the countries studied corresponded with the respective models of social policy more clearly in the mid-1990s than they did 15 years earlier. Generally speaking, the poverty rate is slightly under 5% in the Nordic countries, around 7.5% in Central Europe, 10% in Canada, 12.5% in the UK, and as high as 17.5% in the USA. All the countries included in the analysis share the trend that the primary distribution - based on the market income - has become less equal than before. In each country, the proportion of population being able to gain subsistence from the market alone has decreased continuously. This trend is significantly more remarkable than the change in actual poverty, which means that the absolute poverty alleviating impact of the income redistribution systems became stronger in these countries during the period 1980-1995. The analysis of income inequality produced a basically similar picture of the differences across the countries and the models of social policy as the analysis of poverty did. In comparison to poverty, however, the change is generally speaking less extensive. The Nordic countries, in particular, have been capable of responding to the rise of the market income differences so that the income inequality for disposable incomes has practically not increased at all. Canada shows a parallel trend. The USA and, in particular, the UK represent the opposite development. We also analyzed trends of poverty in various population groups. It was found that by 1995 poverty had turned into a risk of young adults in all the countries studied. The poverty rate increased for the age group 18-30 years in all countries, while an opposite trend was observed among the elderly, in particular those aged over 65. Poverty rate among the elderly is nowadays below the average population-level rate in all the countries studied.

Suggested Citation

  • Veli-Matti Ritakallio, 2001. "Trends of Poverty and Income Inequality in Cross-National Comparison," LIS Working papers 272, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:liswps:272
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    Cited by:

    1. Kenneth Nelson, 2004. "Mechanisms of Poverty Alleviation," LIS Working papers 372, LIS Cross-National Data Center in Luxembourg.
    2. de Neubourg, Chris & Castonguay, Julie & Roelen, Keetie, 2007. "Social safety nets and targeted social assistance : lessons from the European experience," Social Protection Discussion Papers and Notes 41529, The World Bank.
    3. Kenneth Nelson, 2004. "The Formation of Minimum Income Protection," LIS Working papers 373, LIS Cross-National Data Center in Luxembourg.
    4. Almas Heshmati, 2006. "Continental And Sub-Continental Income Inequality," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 7-52, January.
    5. Heshmati, Almas, 2004. "Data Issues and Databases Used in Analysis of Growth, Poverty and Economic Inequality," IZA Discussion Papers 1263, Institute of Labor Economics (IZA).
    6. Kyo-seong Kim & Yongwoo Lee & Yu-jeong Lee, 2010. "A Multilevel Analysis of Factors Related to Poverty in Welfare States," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 99(3), pages 391-404, December.
    7. Heshmati, Almas, 2004. "Regional Income Inequality in Selected Large Countries," IZA Discussion Papers 1307, Institute of Labor Economics (IZA).
    8. Alfio Cerami, 2003. "The Impact of Social Transfers in Central and Eastern Europe," LIS Working papers 356, LIS Cross-National Data Center in Luxembourg.

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