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Middle Class, Government Effectiveness and Poverty in the EU: A Dynamic Multilevel Analysis
Author(s) -
Bosco Bruno,
Poggi Ambra
Publication year - 2020
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12403
Subject(s) - poverty , economics , econometrics , value (mathematics) , eu countries , inequality , demographic economics , european union , statistics , economic growth , mathematics , international economics , mathematical analysis
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. We isolate true state dependence phenomena by disentangling the effects of observed and unobserved heterogeneity at country level and employ cofactors not previously considered by the literature. Estimates show that unobserved heterogeneity across individuals remains large, even after explicitly controlling for the observable components of individual characteristics. The initial value of poverty has large effects on current poverty status but this effect is not uniform across countries. The risk of poverty is negatively related to the size of the structural middle class and to the level of structural social expenditure but it increases when l agged total public expenditure increases (with respect to the structural value). There is strong evidence of true state dependence.