Structural theory and relative poverty in rich Western democracies, 1969–2000

Abstract

This study assesses if structural theory explains the variation in poverty across rich Western democracies. With unbalanced panel analysis of 18 countries, two poverty measures and controlling for the welfare state and economic performance, I examine five structural factors: manufacturing employment, agricultural employment, female labor force participation, the elderly population, and children in single mother families. Manufacturing employment, female labor force participation, elderly population, and children in single mother families significantly influence the headcount measure of poverty, while agricultural employment is insignificant. By contrast, all five structural variables are insignificant for the interval measure of poverty. For the headcount, the structural variables have a more powerful influence than economic growth (the only significant indicator of economic performance) but a smaller influence than the welfare state. For the interval measure, the welfare state has a much larger influence than economic growth, and the insignificant structural and other economic variables. Counterfactual simulations are used to illustrate consequences of these effects for the U.S., Germany, and Sweden. Sensitivity analyses demonstrate the main conclusions hold regardless of the U.S. cases. Though structural variables influence one of the two poverty measures, the welfare state is most important to explaining poverty in rich Western democracies.