Effectiveness of Poverty Reduction in the EU: A Descriptive Analysis

Leiden University, Department of Economics Research Memorandum No. 2008.06

58 Pages Posted: 16 Jul 2009

See all articles by Koen Caminada

Koen Caminada

Leiden Law School - Department of Economics

Kees Goudswaard

Leiden Law School - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

Abstract

The European Union coordinates and encourages Member State actions to combat poverty, and to reform their social protection systems on the basis of policy exchanges and mutual learning (‘best practices’). Some EU countries are more effective in poverty reduction than others. What can explain these variations in effectiveness‘ This paper analyses the effectiveness of welfare state policies and especially social transfers in EU-countries in alleviating poverty. To indicate whether European economic integration may have had any impact on poverty reduction, we also include several non-EU15 countries as a benchmark into our analysis. We analyze on a cross-country basis the relationship between poverty rates and social effort, as measured by social expenditure ratios. We also correct these expenditure ratios for the impact of the tax system and for private social arrangements, using OECD methodology. Next, we compare poverty rates at the levels of market and disposable incomes, that is before and after transfers, in order to analyze the effect of tax and transfer policies in reducing poverty, i.e. to determine the target efficiency of social transfers. We perform several tests with the most recent data (LIS, OECD SOCX, and Eurostat: ECHP/EU-SILC).

Our results are less clear cut than earlier findings. We still find a quite strong negative relationship between the level of social expenditure and poverty among OECD countries. However, for EU-countries this relationship is weaker and there are substantial differences within the EU15. After correcting for the impact of taxes and for private social arrangements, the linkage between social effort and poverty levels becomes even weaker. Also, we do not find a strong relationship between levels of social spending and antipoverty effects of social transfers and taxes. At the program level, family programs and child support alleviate poverty to a large extent.

Keywords: Poverty, welfare states, Lisbon objectives, social indicators

JEL Classification: H53, H55

Suggested Citation

Caminada, Koen and Goudswaard, Kees, Effectiveness of Poverty Reduction in the EU: A Descriptive Analysis (2008). Leiden University, Department of Economics Research Memorandum No. 2008.06, Available at SSRN: https://ssrn.com/abstract=1434669 or http://dx.doi.org/10.2139/ssrn.1434669

Koen Caminada (Contact Author)

Leiden Law School - Department of Economics ( email )

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HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/caminada.html

Kees Goudswaard

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

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