The evolution of poverty over time in the EU-28 countries: an analytical approach using the System-GMM methodology

Abstract

The aim of this article is the investigation of poverty in the EU countries associated with the structural changes in the reproduction pattern of the labor force that take place during the period of economic crisis. The problem of poverty has, indeed, been aggravated mostly in the countries of European periphery due to the harder versions of the austerity policies-cum-the pattern of flexibility of the labor market. On the basis of a dynamic model, System-GMM, it becomes obvious that the prolonged recession and the already high level of poverty of the previous years affect in large extent the current level of poverty indicating a kind of history effect. Moreover, a number of explanatory variables such as the economic growth, the rate of unemployment, the distribution of income, the social expenditures, the development and the urbanization process, the trade density as well as the degree of intra-industry trade seem to be correlated with the diachronic evolution of poverty and its differential dynamics among European countries. In that sense the transformation of economic policies, in parallel with the augmentation of the social expenditures seem to be conditio sine qua non for coming up against the severe problems of poverty in Europe.