Finding out the Routes to Escape Poverty: The Relevance of Demographic vs. Labor Market Events in Spain

Abstract

The knowledge of which events are most effective in pushing households out of deprivation should help in designing poverty-alleviating social policy. Using longitudinal data for Spain, we analyze the nature of events pushing poor households out of poverty, adding an interesting decomposition of transitions: the occurrence of an event and the income change implied by it. We find that, similarly to other developed countries, the events that most help Spanish households in leaving poverty are related to changes in labor status of household members. However, non-labor income changes are significantly more important in Spain than elsewhere. Copyright 2003 Blackwell Publishing Ltd..

Understanding poverty persistence in Spain

“…Cantó et al (2003) using the Encuesta Contínua de Presupuestos Familiares (ECPF) for the 1985-1995 period find that the decline in poverty of the late 1980s may be associated with high exit rates rather than a major improvement in the situation of those at risk of falling into it. However, the increase in poverty risk experienced by Spaniards in the early 1990s was due both to the increase in poverty entries and, especially, to the reduction in poverty exits.…”

“…As for the characterization of poverty dynamics, Cantó (2003) assesses the importance of demographic and socio-economic characteristics for the probability of poverty exit. She finds that less than 10 % of the transitions out of poverty are linked to demographic events while the remainder are related to changes in the labour market or the receipt of social assistance benefits.…”

“…As for attrition, Cantó et al (2003) and Cantó (2003) do take into account potential non-randomness of sample reduction through the construction of their own sample weights (also see, for a similar strategy, Ayala et al 2006). The inconvenience of this strategy is that the control is over observed heterogeneity only.…”

“…Footnote 9 continued The authors argue that temporary income variations, transitory absence of income and measurement error may explain why exits do not seem to depend on the poverty gap. Cantó et al (2003), however, explain that the origin may be in demographic and labour market transitions.…”

“…Note that this specification implies that two sets of coefficients are estimated: if P it−1 = 1, α 1 z it−1 is relevant and refers to poverty persistence characteristics; instead if P it−1 = 0, α 2 z it−1 is estimated and accounts for poverty entry characteristics. Also the vector of explanatory variables always refers to t − 1 in order to reduce endogeneity/simultaneity problems with poverty transitions (see Jenkins 2000;Cantó 2003). 13 Furthermore, ω it can be written as ω it = ζ i + τ it where the first term is the individual specific effect that stands for all unobserved determinants of conditional poverty that are time-invariant for a given individual (e.g.…”