Cross-national differences in determinants of multiple deprivation in Europe

1. Cross-national differences in determinants of multiple deprivation in Europe Francesco Figari EPUNet Conference May, 8th 2006

2. 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?

3. 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

4. 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

5. 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

6. Data • ECHP • 1994 – 2001 • 11 countries (excluded: Germany, UK, Luxembourg and Sweden)

7. 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 a for overall deprivation

8. Average number of items lacking in the Overall Deprivation

9. Deprivation index Prevalence weighting procedure within each country and each wave - Each item (j) - Each household(h) Normalisation  

10. Deprivation index Country-specific and time varyingweights  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

11. Overall deprivation index - 2000

12. Overlap Income - deprivation

13. Low income - deprivation

14. Econometric specification • 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

15. Decomposition of deprivation gap Average predicted deprivation score  Averaging approach: contribution of each variable 

16. Results: Fixed Effects Hausman 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

17. Decomposition of deprivation gap

18. Decomposition of deprivation gap Income

19. Decomposition of deprivation gap Employment status of household head

20. Decomposition of deprivation gap Housing tenure

21. Decomposition of deprivation gap Family structure

22. Decomposition of deprivation gap Constant

23. Cross-country conclusions High 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)

25. 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

26. 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.

27. Average number of items lacking in the Basic Deprivation

28. Average number of items lacking in the Secondary Deprivation

29. BASIC DIMENSION Can 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?

30. SECONDARY DIMENSION Affordability of… … car … tv … video recorder … micro wave … dishwasher … telephone

31. HOUSING FACILITIES DIMENSION Does the dwelling have… … bath or shower? … indoor flushing toilet? … hot running water? • HOUSING DETERIORATION DIMENSION Does the accommodation have… … leaky roof? … damp walls, floors, foundations…? … rot in window frames or floors?

32. ENVIRONMENT DIMENSION Does 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?

33. 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

34. Econometric model • Random Effects • Fixed Effects

35. Results: Fixed Effects Hausman 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 significantthat 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.

36. Results: Fixed Effects Health 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