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Cambridge Journal of Economics Advance Access originally published online on June 6, 2005
Cambridge Journal of Economics 2006 30(2):181-199; doi:10.1093/cje/bei054
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

The sensitivity of poverty rates to macro-level changes in the European Union

Herwig Immervoll, Horacio Levy, Christine Lietz, Daniela Mantovani and Holly Sutherland*

* University of Cambridge and European Centre for Social Welfare Policy and Research, Vienna; Universitat Autonoma de Barcelona; University of Cambridge; University of Cambridge, and University of Essex and DIW Berlin, respectively

Address for correspondence: Holly Sutherland, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, UK; email: hollys{at}essex.ac.uk

Abstract

The authors use the European Union-wide tax–benefit model, EUROMOD, to establish baseline rates of relative poverty in 1998 for each of the Member States and then explore their sensitivity to (a) an increase in unemployment, (b) real income growth and (c) an increase in earnings inequality. They find that poverty rates are sensitive to such ‘macro-level’ changes but that the size—and in some cases the direction—of the effect varies across countries. If such indicators are to be used in judging the effectiveness of social policies, it is important that differences in responsiveness are fully understood.

Key Words: European Union • Microsimulation • Social indicators

JEL classifications: C81, D31, I32

Manuscript received October 6, 2003; final version received October 27, 2004.


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