Public Transfers and the Age-Profile of Poverty in Europe

Abstract

Ensuring adequate living standards to a growing number of elderly while restraining the growth of pension spending represents the main challenge for pension policy in most countries. There is a need for an in-depth analysis of the economic conditions of the elderly which can help targeting resources in the coming years to the more needy groups. Children are another potentially vulnerable group of the population: their poverty can affect human capital accumulation and have long lasting effects on life-time well-being. Using data from the latest wave of the EU Survey on Income and Living Conditions (SILC), we document that the poverty rates of these two age groups with respect to the other components of the population differ considerably across European countries. These differences are largely due to the different anti-poverty effectiveness of national social policies. In particular, in 'Social Democratic' and 'Corporatist' welfare states the age-profile of poverty is flat; on the contrary, in Anglo-Saxon and especially in Southern European countries young and elderly groups show remarkably higher poverty rates.