Caminada, Koen and Goudswaard, Kees and Koster, Ferry (2010): Social income transfers and poverty alleviation in OECD countries. Published in: Department of Economics Research Memorandum No. 2010.01 (2010): pp. 1-41.
Download (325kB) | Preview
Poverty alleviation is an important policy objective in developed welfare states. This paper analyzes the effect of social transfer policies on poverty. A vast literature claims that high social effort goes along with low poverty levels across countries. This paper systematically analyzes this claim. We employ several social expenditure ratios (as a proxy for social effort) and correct for the impact of the tax system and for private social arrangements, using OECD methodology. Also, we control for demographic and macro-economic differences across countries. We performed several tests with the most recent data (LIS, OECD, and SOCX) for the period 1985-2005. Our results are less clear-cut than earlier findings. We still find quite a strong negative relationship between the level of public social expenditure and poverty among 28 OECD countries. However, for non-EU15 countries this relationship is stronger than for the EU15. The results alter considerably if private social expenditures are included as well. For non-EU15 countries in our sample, we do not find evidence for a negative correlation between the level of total social spending and the incidence of poverty. In contrast, for the group of EU15 countries private social arrangements do matter as far as poverty alleviation is concerned. Demographic and macro-economic (control) variables are important as well. We developed and employed multiple linear regression models to control for these complex interrelationships. Our results point at one direction: gross social spending is the driving force as far as differences in poverty levels across countries are concerned, although the ageing of the population and unemployment rates have some explanatory power, both for non-EU15 countries and for EU15 countries. Our analyses captures another effect as well. It is essential to control for the impact of taxes on the social expenditure ratios used. By doing so, the linkage between social effort and poverty levels across countries becomes insignificant. In view of the fact that with these corrections on expenditure statistics, we have a much better – although still not perfect - measure of what governments really devote to social spending, the familiar claim that higher social expenditure goes along with lower poverty levels does not hold across the 28 examined countries examined. We believe that our comparison of the impact of several social expenditure ratios on poverty levels has emphasized that taking into account both the public/private-mix and the impact of the tax system on social expenditure ratios really matters for comparative welfare state research and for policy makers who want to reduce poverty.
|Item Type:||MPRA Paper|
|Original Title:||Social income transfers and poverty alleviation in OECD countries|
|Keywords:||poverty, welfare states, social transfers|
|Subjects:||H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions
H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs
I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty
|Depositing User:||Koen Caminada|
|Date Deposited:||17. Feb 2010 07:02|
|Last Modified:||08. May 2015 17:26|
Adelantado, J., and E. Calderón Cuevas (2006), ‘Globalization and the welfare state: the same strategies for similar problems?’, Journal of European Social Policy, 16(4), pp. 374-386.
Adema, W. (2001), ‘Net Social Expenditure: 2nd edition’, Labour Market and Social Policy - Occasional Papers, No. 52, Paris: OECD.
Adema, W., and M. Ladaique (2005), ‘Net Social Expenditure, 2005 edition’, OECD Social, Employment and Migration Working Paper 29, Paris: OECD.
Alesina, A., and E.L. Glaeser (2004), Fighting Poverty in the US and Europe: A World of Difference, Oxford: Oxford University Press.
Armstrong, K.A. (2006), ‘The ‘Europeanisation’ of Social Exclusion: British Adaption to EU Co-ordination’, British Journal of Politics & International Relations 8 (1), pp. 79-100.
Atkinson, A.B. (1987), ‘On the measurement of poverty’, Econometrica 55 (4), pp. 749-764.
Atkinson, T. (2002), ‘Social Inclusion and the European Union’, Journal of Common Market Studies 40 (4), pp. 625-643.
Atkinson, A.B. (2003), ‘Income Inequality in OECD Countries: Data and Explanations’, CESifo Economic Studies 49(4), pp. 479-513.
Atkinson, A.B., and A. Brandolini (2001), ‘Promise and Pitfalls in the Use of Secondary Data-Sets: Income Inequality in OECD Countries as a Case Study’, Journal of Economic Literature 39 (3) (September), pp. 771-800.
Atkinson, T., B. Cantillon, E. Marlier and B. Nolan (2002), Social Indicators. The EU and Social Inclusion, Oxford: University Press.
Atkinson, A.B., L. Rainwater and T.M. Smeeding (1995), ‘Income Distribution in OECD Countries: Evidence from the Luxembourg Income Study’, OECD Social Policy Studies 18, Paris.
Beck, N., and J.N. Katz (1995), ‘What to Do (and Not to Do) With Time-Series Cross-Section Data’, American Political Science Review 89(3), pp. 634-647.
Behrendt, Ch. (2000), ‘Is there income poverty in Western Europe? Methodological pitfalls in the measurement of poverty in a comparative perspective’, Luxembourg Income Study Working Paper Series 258, Luxembourg.
Behrendt, Ch. (2002), ‘Holes in the safety net? Social security and the alleviation of poverty in a comparative perspective’, in: R. Sigg and Chr. Behrendt (eds.) Social Security in the Global Village, International Social Security Series, Volume 8, New Brunswick / London: Transaction Publishers, pp. 333-358.
Bourguignon, F., L. Pereira da Silva and N. Stern (2002), ‘Evaluating the Poverty Impact of Economic Policies: Some Analytical Challenges’, Stern - Washington DC: The World Bank (Mimeo), 2002.
Brady, D. (2004), ‘The welfare state and relative poverty in rich western democracies, 1967-1997’, Luxembourg Income Study Working Paper Series 390, Luxembourg.
Brandolini, A. (2006), ‘Measurement of income distribution in supranational entities: The case of the European Union’, Luxembourg Income Study Working Paper Series 452, Luxembourg.
Brandolini, A., and T.M. Smeeding (2007), ‘Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes’, Luxembourg Income Study Working Paper Series 458, Luxembourg.
Brandolini, A., and T.M. Smeeding (2008), ‘Inequality: International Evidence’, in: S.N. Durlauf and L.E. Blume (eds.), The New Palgrave Dictionary of Economics, Basingstoke: Palgrave Macmillan, pp. 1013-1021.
Caminada, K., and K.P. Goudswaard (2001), ‘International Trends in Income Inequality and Social Policy’, International Tax and Public Finance 8 (4), pp. 395-415.
Caminada, K., and K. Goudswaard (2002), ‘Income Distribution and Social Security in an OECD Perspective’, in: R. Sigg and Chr. Behrendt (eds.), Social Security in the Global Village, International Social Security Series, Volume 8, New Brunswick / London: Transaction Publishers, pp. 163-188.
Caminada, K., and K.P. Goudswaard (2005), ‘Are Public and Private Social Expenditures Complementary?’, International Advances in Economic Research 11 (2), pp. 175-189.
Caminada, K. and K.P. Goudswaard (2009a), ‘Effectiveness of Poverty Reduction in the EU: a Descriptive Analysis’, Poverty & Public Policy, 1 (2), Article 5, pp. 1-51.
Caminada, K., and K.P. Goudswaard (2009b), ‘Social expenditure and poverty reduction in the EU15 and other OECD countries’, Research Memorandum Department of Economics 2009.02, Leiden University.
Cantillon, B., I. Marx and K. Van den Bosch (2003), ‘The puzzle of egalitarianism: About the relationships between employment, wage inequality, social expenditures and poverty’, European Journal of Social Security, 5(2), pp.108-127.
Castles, F.G. (2002), ‘Developing New Measures of Welfare State Change and Reform’, European Journal of Political Research 41(5), pp. 613-641.
Castles, F.G. (2004), The Future of the Welfare State: Crisis Myths and Crisis Realities, Oxford: University Press.
Clayton, R., and J. Pontusson (1998), ‘Welfare-State Retrenchment Revisited: Entitlement Cuts, Public Sector Restructuring, and Inegalitarian Trends in Advanced Capitalist Societies’, World Politics 51(1), pp. 67-98.
Danziger, S., R. Haveman and R. Plotnick (1981), ‘How Income Transfer Programs Affect Work, Savings and Income Distribution: A Critical Assessment’, Journal of Economic Literature 19 (September), pp. 975-1028.
Duclos, J-Y, D.E. Sahn and S.D. Younger (2007), ‘Using Ordinal Approach to Multidimensional Poverty Analysis’, in: N. Kakwani and J. Silber (eds.), The Many Dimensions of Poverty, New York: Palgrave Macmillan, pp. 244-261.
Esping-Andersen, G., and J. Myles (2009), ‘Economic Inequality and the Welfare State’, in: W. Salverda, B. Nolan and T.M. Smeeding (eds.), The Oxford Handbook of Economic Inequality, New York: Oxford University Press, pp. 639-664.
European Commission (2008), Joint Report on Social protection and social inclusion 2008. Social inclusion, pensions, healthcare and long term care, Luxembourg: Office for Official Publications of the European Communities.
European Commission (2009), Social protection and social inclusion 2008: EU indicators, Commission Staff Working Document, Brussels: European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities.
Eurostat (2005), ‘The continuity of indicators during the transition between ECHP and EU-SILC’, Working Paper and Studies, Eurostat.
Eurostat (2009), Structural Indicators EU - Social Cohesion, http://epp.eurostat.ec.europa.eu/.
Förster, M. (1993), ‘Comparing Poverty in 13 OECD Countries: Traditional and Synthetic Approaches,’ Luxembourg Income Study Working Paper 100, Luxembourg.
Förster, M., and M. Pearson (2002), ‘Income distribution and poverty in the OECD area: trends and driving forces’, OECD Economic Studies, No. 34, 2002/1, Paris: OECD, pp. 7-39.
Förster, M., and M. Mira d’Ercole (2005), ‘Income Distribution and Poverty in OECD Countries in the Second Half of the 1990s’, OECD Social, Employment and Migration Working Papers, no. 22.
Gottschalk, P. and T.M. Smeeding (2000), ‘Empirical Evidence on Income Inequality in Industrialized Countries’, in: A.B. Atkinson and Bourgignon, F. (eds), Handbook of Income Distribution, New York: Elsevier-North Holland Publishers, pp. 261-308.
Gottschalk, P., and T.M. Smeeding (1997), ‘Cross-National Comparisons of Earnings and Income Inequality’, Journal of Economic Literature 35 (June), pp. 633 687.
Guio, A.-C. (2005), ‘Income poverty and social exclusion in the EU25’, Statistics in focus: population and social conditions, 13/2005, pp. 1-7.
Hagenaars, A. J. M (1986), The Perception of Poverty, Amsterdam: North-Holland.
Hagenaars, A., and K. de Vos (1987), ‘The definition and measurement of poverty’, The Journal of Human Resources 23 (2), pp. 211-221.
Haveman, R. (2008), ‘What Does It Mean to Be Poor in a Rich Society?’, Institute for Research on Poverty Discussion Paper 1356-08, Madison.
Kakwani, N., and J. Silber (2007), ‘Introduction: On Quantitative Approaches to Multidimensional Poverty Measurement’, in: N. Kakwani and J. Silber (eds.), The Many Dimensions of Poverty, New York: Palgrave Macmillan, pp. xviii-xxiv.
Kakwani, N., and J. Silber (eds.) (2007), The Many Dimensions of Poverty, New York: Palgrave Macmillan. Kakwani, N., and J. Silber (eds.) (2008), Quantitative Approaches to Multidimensional Poverty Measurement, New York: Palgrave Macmillan.
Kangas, O., and J. Palme (2000), ‘Does Social Policy Matter? Poverty Cycles in OECD Countries’, International Journal of Health Services 30(2), pp. 335-352.
Kenworthy, L. (1999), ‘Do Social Welfare Policies Reduce Poverty? A Cross-National Assessment’, Social Forces 77 (3), pp. 1119-1139.
Kim, H. (2000), ‘Anti-Poverty Effectiveness of Taxes and Income Transfers in Welfare States’, International Social Security Review 53 (4) , pp. 105–129.
Kühner, S. (2007), ‘Country-Level Comparisons of Welfare State Change Measures: Another Facet of the Dependent Variable Problem within the Comparative Analysis of the Welfare State?’, Journal of European Social Policy 17 (1), pp. 5-18.
Luxembourg Income Study (2009), LIS Key Figures on Poverty, Luxembourg (www.lisproject.org).
Marcus, J. and S. Danziger (2000), ‘Income Poverty in Advanced Countries’, in: A.B. Atkinson, and Bourguignon, F. (eds.), Handbook of Income Distribution, New York: Elsevier-North Holland Publishers.
Martin, M., and K. Caminada (2009), 'Welfare Reform in the United States. A descriptive policy analysis'. Department of Economics Research Memorandum 2009.03, Leiden University.
Nolan, B., and I. Marx (2009), ‘Economic Inequality, Poverty, and Social Exclusion’ in: W. Salverda, B. Nolan and T.M. Smeeding (eds.), The Oxford Handbook of Economic Inequality, New York: Oxford University Press, pp. 315-341.
Notten, G., and C. de Neuborg (2007), ‘Relative or absolute poverty in the US and EU? The battle of the rates’, MPRA Working Paper 5313, Munich.
OECD (2007), $ocial €xpenditure 1980-2003. Interpretative guide of SOCX, available at www.oecd.org/els/social/expenditure.
OECD (2008), Growing unequal? Income distribution and Poverty in OECD Countries, Paris: OECD.
Osberg, L. (2000), ‘Long Run Trends in Economic Inequality in Five Countries—A Birth Cohort View’, Luxembourg Income Study Working Paper Series 222, Luxembourg
Pestieau, P. (2006), The Welfare State in the European Union: Economic and Social Perspectives, Oxford: University Press.
Praag, B.M.S. van (1968), Individual Welfare Functions and Human Behavior, Amsterdam: North-Holland.
Praag, B.M.S. van, A.J. M. Hagenaars, and H. van Weeren (1982), ‘Poverty in Europe’, Review of Income and Wealth 28 (3), pp. 345–359.
Rainwater, L., and T. Smeeding (2003), Poor Kids in a Rich Country, New York: Russell Sage Foundation.
Sainsbury, D., and A. Morissens (2002), ‘European anti-poverty policies in the 1990s: Toward a common safety net’, Luxembourg Income Study Working Paper Series 307, Luxembourg.
Scruggs, L., and J.P. Allan (2006), ‘The Material Consequences of Welfare States: Benefit Generosity and Absolute Poverty in 16 OECD Countries’, Comparative Political Studies 39, pp. 880-904.
Smeeding, T. M. (2005), ‘Public Policy, Economic Inequality, and Poverty: The United States in Comparative Perspective’, Social Science Quarterly, vol. 86 (supplement), pp. 955-983.
Smeeding, T. (2006), ‘Poor People in Rich Nations: The United States in Comparative Perspective’, Journal of Economic Perspectives 20 (1), pp. 69-90.
Smeeding, T., L. Rainwater, and G. Burtless (2000), ‘United States Poverty in a Cross-National Context’, Luxembourg Income Study Working Paper Series 244, Luxembourg. SOCX OECD (2008), Social Expenditure Database 1980-2005 (www.oecd.org/els/social/expenditure).
Super, D.A. (2008), ‘Privatization, Policy Paralysis, and the Poor’, California Law Review 96 (393), pp. 393-469.
Swabish, J., T.M. Smeeding and L. Osberg (2006), ‘Income Distribution and Social Expenditures: A Cross National Perspective’, in: D.B. Papadimitriou (ed.), The Distributional Effects of Government Spending and Taxation, Northampton MA: Edward Elgar Publishing, pp. 247-288.
Thorbecke, E. (2007), ‘Multidimensional Poverty: Conceptual and Measurement Issues’, in: N. Kakwani and J. Silber (eds.), The Many Dimensions of Poverty, New York: Palgrave Macmillan, pp. 3-19.
Vliet, O. van, M. Kaeding (2007), ‘Globalisation, European Integration and Social Protection – Patterns of Change or Continuity?’, Department of Economics Research Memorandum 2007.06, Leiden University.
Vliet, O. van (2010), ‘Divergence within Convergence: Europeanisation of Social and Labour Market Policies’, Journal of European Integration, forthcoming.