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Government effectiveness, middle class and poverty in the EU: A dynamic multilevel analysis

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  • Bruno, Bosco
  • Ambra, Poggi

Abstract

Using the 2008-2011 EU-Statistics on Income and Living Conditions data, we implement a dynamic three-level model to analyze poverty persistence in 26 EU countries. Our aim is to understand why an individual experiencing poverty today is much more likely to experience it again. We innovate with respect to the existing literature by disentangling the effects of observed and unobserved heterogeneity at country level on the process that may generate poverty persistence. In particular, after controlling for socio-economic factors, including those related to qualitative and quantitative indicators of the welfare state, we analyze for the first time how the size of the middle class in each country affects current individual risk of poverty and its dynamics. Our findings show that the risk of poverty is negatively related to the quality of government activity to social expenditure and to the size of the middle class. Similarly, we show that the impact of past records on current poverty levels may be stronger (weaker) when institutional quality is low (high). This also indicates that good institutions and satisfactory social expenditure may help reducing the adverse current and future impact of experiencing poverty for any level of per capita income and middle class size. Policy implications are also discussed.

Suggested Citation

  • Bruno, Bosco & Ambra, Poggi, 2016. "Government effectiveness, middle class and poverty in the EU: A dynamic multilevel analysis," Working Papers 344, University of Milano-Bicocca, Department of Economics, revised 27 Jun 2016.
    • Handle: RePEc:mib:wpaper:344
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    References listed on IDEAS

    as
    1. Kenworthy, Lane, 2013. "Progress for the Poor," OUP Catalogue, Oxford University Press, number 9780199676927.
    2. Ambra Poggi, 2007. "Does persistence of social exclusion exist in Spain?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 53-72, April.
    3. Andriopoulou, Eirini & Tsakloglou, Panagiotis, 2011. "The determinants of poverty transitions in Europe and the role of duration dependence," MPRA Paper 30659, University Library of Munich, Germany.
    4. Joakim Palme & Walter Korpi, 1998. "The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality and Poverty in the Western Countries," LIS Working papers 174, LIS Cross-National Data Center in Luxembourg.
    5. Lane Kenworthy, 1998. "Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment," LIS Working papers 188, LIS Cross-National Data Center in Luxembourg.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Poverty; multilevel model; dynamics; government effectiveness; middle class;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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