Inequality and poverty in the European Union: In search of lost dynamics

Celia Gil-Bermejo Lazo, Jorge Onrubia Fernández and Antonio Jesus Sanchez Fuentes ()
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Celia Gil-Bermejo Lazo: Instituto Complutense de Estudios Internacionales (ICEI), Universidad Complutense de Madrid.
Jorge Onrubia Fernández: Instituto Complutense de Estudios Internacionales (ICEI), Universidad Complutense de Madrid.

No 2204, Working Papers del Instituto Complutense de Estudios Internacionales from Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales

Abstract: This paper analyses the relationships between income inequality, monetary poverty and economic growth for a sample of 30 European economies over the period 2004-2020. To do so, we adopt a novel approach, based on a dynamic analysis that takes into account the variability that can occur in the evolution of these relationships over the period analysed. The proposed panel-VAR model allows us to perform a Granger causality analysis between the variables mentioned. In a second stage, we complete this analysis with the application of the iterative PC algorithm that allows us to interpret the results of the model by defining the corresponding causal graphs. For the empirical analysis we use micro-data from the EU-SILC database for the period 2004-2020. The results obtained show that, for the set of economies analysed, inequality has a positive effect on poverty. Moreover, we also find that this dynamic is reversed, with a double positive causality between these variables. In addition, we do not find evidence of a poverty or inequality reducing effect of economic growth. However, we find that these results differ across countries, depending on the type of welfare state in place.

Keywords: Inequality; Poverty; Economic Growth; Causality; Causal Graphs (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022
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