Do different household models affect poverty? A dynamic panel analysis in 28 European countries

Abstract

ABSTRACT The increase in the number of single-parent households and divorces, the decrease in marriages and the increasing relevance of household models with more than two cohabiting adults represent a recent social trend that emerges in modern societies. In this paper, we investigate how the evolution in the incidence of different household models affects household poverty in Europe. Using a panel of 28 European countries over a 14-year period (2005 to 2018), we implement both panel fixed- and random-effects models and the system-GMM dynamic panel method by estimating short- and long-run coefficients. Our analysis points out that household’s dissolution and the share of single-parent households with children are positively correlated with the risk of poverty; extended households play a role in insuring against poverty. Moreover, we find that households’ poverty is persistent over time with a speed of adjustment equal to 0.5 and a median time lag of one year. Our results also suggest that family policies represent an effective tool against the effects of social exclusion, becoming more evident in the long run.