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Can Higher Employment Levels Bring Lower Poverty in the EU? Regression Based Simulations of the Europe 2020 Target

Ive Marx, Pieter Vandenbroucke () and Gerlinde Verbist ()
Additional contact information
Pieter Vandenbroucke: University of Antwerp
Gerlinde Verbist: University of Antwerp

No 6068, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: At the European level and in most EU member states, higher employment levels are seen as key to better poverty outcomes. But what can we expect the actual impact to be? Up until now shift-share analysis has been used to estimate the impact of rising employment on relative income poverty. This method has serious limitations. We propose a more sophisticated simulation model that builds on regression based estimates of employment probabilities and wages. We use this model to estimate the impact on relative income poverty of moving towards the Europe 2020 target of 75 percent of the working aged population in work. Two sensitivity checks are included: giving priority in job allocation to jobless households and imputing low instead of estimated wages. This paper shows that employment growth does not necessarily result in lower relative poverty shares, a result that is largely consistent with observed outcomes over the past decade.

Keywords: employment growth; poverty; Europe 2020; household work intensity; low pay (search for similar items in EconPapers)
JEL-codes: I32 J21 R28 J68 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2011-10
New Economics Papers: this item is included in nep-eec, nep-eur and nep-lab
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