Poverty Dynamics: An analysis of the 1994 and 1995 waves of the European Community Household Panel Survey

Abstract

Recent poverty research based on analyses of panel data have highlighted the importance of income dynamics. In this paper we study mobility into and out of relative income poverty from one year to the next using data for twelve countries from the European Community Household Panel Survey (ECHP). The ECHP has unique potential as a harmonized data set to serve as the basis for comparisons of income and poverty dynamics across EU countries, and here we begin exploiting this potential by analysing income poverty transitions from Wave 1 to Wave 2. As well as describing the extent of these transitions, we analyse the pattern by fitting log-linear and linear by linear models commonly employed in the analysis of social mobility. Moving from general to specific models we show the relative impact of hierarchy, immobility and affinity effects. Our analysis shows that cross-national variation in short-term poverty dynamics is predominantly a consequence of ‘shift’ rather then ‘association effects’. Variation across countries in patterns of poverty persistence is extremely modest. Models that assume that the processes underlying poverty dynamics are constant across countries perform almost as well as those that allow for cross-national variability.