Cross-national differences in determinants of multiple

deprivation in Europe

Francesco FigariEPUNet Conference

May, 8th 2006

Research questions

• Which is the longitudinal relationship between income (and other determinants) and deprivation in the European countries?

• Which are the reasons for the deprivation differentials across Europe?

Multiple deprivation• Multidimensional approach → outcome elements

(Townsend 1979)

• Concept and measurement → indirectly and directly (Ringen 1987, 1988)

• Deprivation → Exclusion from minimum living standards (Nolan and Whelan 1996)

• Social exclusion → Relationship between current income and living conditions indicators

Motivations

• Policy → at the EU level necessity of quantitative indicators to monitor the Lisbon Strategy

• Conceptual → “poverty” ≠ “deprivation”

• Empirical → mismatch “poverty” – “deprivation”→ different determinants across countries

Empirical literature review

EU level• Nolan and Whelan (1996, …)

– Methodological measurement aspects– Identification of different dimensions of deprivation– Relationship between income poverty and deprivation– Determinants of “consistent poverty”

UK • Berthoud, Bryan and Bardasi (2004)

- Longitudinal relationship between income (and other determinants) and deprivation

Data

• ECHP

• 1994 – 2001

• 11 countries(excluded: Germany, UK, Luxembourg and Sweden)

Items and Dimensions• 24 non-monetary indicators (Eurostat 2002)

• Factor analysis (Whelan et al. 2001) 5 dimensions + Overall

– Basic 7 items: housing, social activities, diet, clothes

– Secondary 6 items: durables

– Housing facilities 3 items: services

– Housing deterioration 3 items: structural parts

– Environment 5 items: noise, pollution, crime, space, light

• Cronbach’s for overall deprivation

0.76 0.74 0.65 0.82

IT NL PT

0.70 0.70 0.65 0.79 0.73 0.69 0.71

ES FI FR IEAT BE DK EL

Average number of items lacking in the Overall Deprivation

0

1

2

3

4

5

6

7

819

94

1995

1996

1997

1998

1999

2000

DK

NL

B

F

Irl

I

EL

E

P

A

Fin

Deprivation indexPrevalence weighting procedure within each country and each wave

- Each item (j)

- Each household (h)

Normalisation

DW= 0.99+0.83 = 1.82

I p IW

tv 1 99.35% 0.99dishwasher 1 82.57% 0.83

jthjt

Whjt pII

J

j

Whjtht ID

1

100*

11

J

jjt

J

j

Whjtht pID ]100,0[htD

Deprivation indexCountry-specific and time varying weights

to compensate for variations in deprivation due to the trend of possession over time and social and cultural differences across countries

At household level and attributed to the individuals to follow them across waves

Just an indicator and not a direct measure of deprivation: weak set of assumptions questionable choice of the indicators formulation of questions in terms of non affordability or unwillingness focus on some specific areas of consumption

The minimum value is not a censored point it cannot be considered as the direct realization of the true and latent deprivation value

Overall deprivation index - 2000

05

1015

20

DK IE NL AT BE FI FR ES IT EL PT

Average overall deprivation score Poverty rate

AT BE DK EL ES FI FR IE IT NL PT

99th percentile 34.90 36.19 32.45 53.75 42.60 36.29 40.86 36.34 42.99 31.72 63.41

Average 6.12 6.49 5.07 17.2 10.13 7.05 8.05 5.13 10.64 5.62 18.23

% with zero 35.16 36.39 47.54 1.84 21.53 32.86 29.97 46.81 15.30 38.20 7.00

Coeff. of Variation 1.253 1.287 1.424 0.738 0.994 1.192 1.168 1.559 0.937 1.314 0.806

Correlation between Overall Deprivation index and equivalent income

AT BE DK EL ES FI FR IE IT NL PT

-0.20 -0.22 -0.19 -0.41 -0.32 -0.26 -0.33 -0.28 -0.36 -0.24 -0.40

Overlap Income - deprivation

010

2030

4050

%

AT DK NL FI BE IE ES FR EL IT PT

Poor and deprived in 2000

Persistently poor and persistently deprived in 1998-2000

Persistently poor in 1998-2000 and deprived in 2000

6

810

12

510

15

810

12

1015

20

68

1012

1015

20

1820

2224

26

1012

1416

18

2022

2426

28

67

89

10

810

1214

5000 10000 15000 4000 6000 80001000012000 5000 10000 15000 4000 6000 80001000012000

4000 6000 8000 1000012000 2000 4000 6000 8000 10000 2000 4000 6000 8000 2000 4000 6000 8000

2000 4000 6000 5000 10000 15000 4000 6000 80001000012000

Denmark Netherlands Belgium France

Ireland Italy Greece Spain

Portugal Austria Finland

Ove

rall

Dep

rivat

ion

Inde

x

Equivalent income PPP

Low income - deprivation

Econometric specification

itititit vD βx• Overall Deprivation Score

• Income (deflated at 2000 prices and exressed in PPS) Social transfers Education level Employment status (employed, unemployed, inactive) Health status Housing tenure (owner, mortgage, tenant, free) Number of adults, number of children, family type,

proportion of elderly• Time-specific effect: dummy variable for each year• Individual-specific unobserved effect

Random and Fixed effects models

itD

itx

tiv

Decomposition of deprivation gap

ccccD β̂xˆ Average predicted deprivation score

ConstantReturnssticsCharacteriGAP

)ˆˆ()ˆˆ(ˆ)( ABABBAABAB DD ββxβxx

Averaging approach:

contribution of each variable

Returns

111

sticsCharacteri

111 )ˆˆ(ˆ)( ABBAAB ββxβxx

Results: Fixed EffectsHausman specification tests suggest a preference for the FE specifications

General robustness of the results across countries according to the expectations

Income negatively associated

the impact of the first lag is stronger than of the current income

the second lag are still statistically significant in most of the countries

Employment status moving into and out of the labour market is as important as being in or out of it

Education level Difficulties to capture the impact of the achievement of a new education level.

Housing tenure penalty of moving in rented houses

Decomposition of deprivation gap

-50

510

15A

bsol

ute

valu

es

NL AT FI IE BE FR IT ES EL PT

Characteristics Returns Constant

Decomposition of deprivation gap

-5 0 5 -5 0 5

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

Characteristics Returns

Current income 1st lagged income 2nd lagged income

Income

Income

Decomposition of deprivation gap

Employment status of household head

-.6 -.4 -.2 0 .2 .4 -.6 -.4 -.2 0 .2 .4

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

Characteristics Returns

workingref unemployref inactref

Employment status HH head

Decomposition of deprivation gap

Housing tenure

-1 -.5 0 .5 1 -1 -.5 0 .5 1

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

Characteristics Returns

Own house Outstanding mortgage Rented Free-rent

House tenure status

Decomposition of deprivation gap

Family structure

-1 0 1 2 3 -1 0 1 2 3

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

Characteristics Returns

Family composition Lone parent

Family composition and lone parent

Decomposition of deprivation gap

Constant

0 5 10 15 20

PT

EL

ES

IT

FR

BE

IE

FI

AT

NL

Returns

Constant

Cross-country conclusionsHigh deprivation countries

Contribution to a reduction of the gap:- increase in income- home ownership - job market participation of household members

Contribution to an increase of the gap:- family composition- (fixed country effect)

Policy implications

• More comprehensive policies in addition to income policies

• Primary attention to long term poverty status

• Definition of the eligibility criteria of the beneficiaries of public policies

Further developments

• Dynamic analysis• short and long term effects of the socio-economic

determinants• persistence of deprivation over time • impact of the determinants given the initial

deprivation conditions.

Average number of items lacking in the Basic Deprivation

0

0.5

1

1.5

2

2.5

3

3.5

4

4.519

94

1995

1996

1997

1998

1999

2000

DK

NL

B

F

Irl

I

EL

E

P

A

Fin

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1994

1995

1996

1997

1998

1999

2000

DK

NL

B

F

Irl

I

EL

E

P

A

Fin

Average number of items lacking in the Secondary Deprivation

• BASIC DIMENSIONCan the household afford…

...keeping its home adequately warm?

...paying for a week's annual holiday away from home?

… replacing any worn-out furniture?

… buying new, rather than second-hand, clothes?

… eating meat, chicken or fish every second day?

… having friends or family for a drink or meal at least once month?

… paying scheduled rent/mortgage and utility bills of the house?

• SECONDARY DIMENSIONAffordability of…

… car

… tv

… video recorder

… micro wave

… dishwasher

… telephone

• HOUSING FACILITIES DIMENSIONDoes the dwelling have…

… bath or shower?

… indoor flushing toilet?

… hot running water?

• HOUSING DETERIORATION DIMENSIONDoes the accommodation have…

… leaky roof?

… damp walls, floors, foundations…?

… rot in window frames or floors?

• ENVIRONMENT DIMENSIONDoes the accommodation have…

… noise from neighbours?

… shortage of space?

Is there any pollution, grime, or other environmental problem…?

Is the accommodation too dark / not enough light?

Is there crime or vandalism in the area?

Variables•Dependent variable Overall Deprivation Score

• HH head and HH members– Income (deflated at 2000 prices and in PPS): current and lagged– Social transfers– Education level (less secondary school, secondary school or +)– Employment status (employed, unemployed, inactive)– Health status – Housing tenure (owner, mortgage, tenant, free) – Number of adults, number of children, family type (single, couple with kids, couple without kids, lone parent), proportion of elderly – Dummy variable for each year

Econometric model

• Random Effects

• Fixed Effects

itititit vD βx

)(β)xxx()( iitiitiit DDD

)}(){(β)xx()()( iitiiitiit vDD 11

Results: Fixed EffectsHausman specification tests suggest a preference for the FE specifications

Income negatively associated

the impact of the first lag is stronger than of the current income

the second lag are still statistically significant in most of the countries

Employment status moving into and out of the labour market is as important as being in or out of it

becoming inactive has a significant and positive impact in DK, FR, EL, NL, PT and FI.

if the proportion of person employed increases in the household the impact is statistically significant that in DK, FR, EL, ES, PT and FI.

Education level negatively associated (RE) but difficulties to capture the impact of the achievement of a new education level.

Results: Fixed EffectsHealth status negatively associated

an improvement in the health status is important in terms of deprivation reduction.

Housing tenure penalty of moving in rented houses rather than in an own house

presence of outstanding mortgage has a negative effect on deprivation score in BE, DK, NL, PT.

the coefficients associated to a free-rented house are always positive (no AT, IE, NL) reflecting the generally poor nature of these houses.

Family structure positive effect of becoming lone parent in BE, DK, FR, ES, NL

positively associated with number of adults and children