Poverty dynamics in Spain: a study of transitions in the 1990s

Abstract

Even if individuals care about their current economic status, they are mainly concerned about the time they remain in it (its duration). The expected duration of an economic status affects how individuals perceive it and therefore, it should modify any economic policy aiming for Social Welfare maximisation. Poverty is defined as a state of economic hardship for individuals or households and therefore, the study of transitions into or out of this status and its duration and persistence bring about further information on the causes of poverty and the ways to exit from it or avoid it. Using longitudinal data on Spanish households, some groups of households are detected as long slayers in poverty after some time in it and other are found as only transitional poor. Some evidence is also found in the data of the duration dependence of the probability of entering or exiting poverty. Moreover, some groups of households reveal a distinct shape of the probability of entering or exiting poverty in time. The group of female headed households and households without a spouse appears to be that having most difficulty in exiting poverty in the short-run. In turn, it is those households headed by an unemployed or part-time employed individual who are more likely to fall into poverty. The main reason pushing a household into or out of poverty seems to be the employment/unemployment and viceversa transition of the head of household. However, changes in the demographic characteristics of the household appear to significantly affect the probability of re-entering poverty for the most mobile group of households