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Poverty and social exclusion: two sides of the same coin or dynamically interrelated processes?

Francesco Devicienti and Ambra Poggi

No 62, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: There is growing interest in the analysis and measurement of social exclusion, to complement the static and dynamic literature on income poverty. On theoretical grounds, social exclusion and income poverty are seen as different processes, but with closely interrelated dynamics. However, our empirical understanding of the way these two processes dynamically interact at the individual level is still very limited. To shed some light on the issue, we use a dynamic bivariate probit model, controlling for unobserved heterogeneity and Wooldridge (2005)-type initial conditions. Both first and second order Markov dynamics are examined. We estimate the model using the Italian sample of the ECHP, waves 1-8, and find a sizable extent of state dependence in both poverty and social exclusion. Moreover, there are dynamic cross-effects, implying that poverty and social exclusion are mutually reinforcing. Social policies aimed at eradicating poverty and avoiding individuals’ social and economic marginalization should take these interaction effects explicitly into account.

Keywords: poverty dynamics; social exclusion; state dependence; dynamic bivariate probit model with random effects. (search for similar items in EconPapers)
JEL-codes: C33 C35 C61 I32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2007
New Economics Papers: this item is included in nep-hap and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Poverty and social exclusion: two sides of the same coin or dynamically interrelated processes? (2011) Downloads
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