How and Why the Dynamics of Poverty Differ Across European Countries

Abstract

In a duration analysis framework, I develop a method in the spirit of the popular Oaxaca-Blinder decomposition that allows disentangling the cross-country differences in measures of poverty dynamics in the contribution due to differences in the distribution of characteristics and the contribution due to differences in the poverty dynamics generating process. I illustrate this with the comparison of ten European countries in the second half of the 1990s. Despite remarkable differences in the composition of the working-age population, the results of the analysis show that cross-country variation in poverty dynamics measures is mainly determined by differences in the poverty dynamics generating process rather than by the heterogeneity in population composition. Since the age of the household head and household living arrangements show the most varied effects among the explanatory variables, the results of the paper point out family related policies as one of the main driver of poverty dynamics heterogeneity.