The determinants of poverty exits and entries and the role of social benefits: the Italian case

Abstract

This paper uses a novel micro econometric approach to analyze the impact of social benefits on the individual probabilities of poverty exit and entry in Italy, and their relative importance with respect to other socio-economic determinants of poverty transitions. Year to year transitions are defined as dichotomous variables capturing the changes of the individual poverty status, and are analyzed using random effects probit models estimated on pooled Italian data from 9 longitudinal components of IT-SILC covering the period 2004-2015. Our results show that social benefits strongly counteract the adverse effects of individual characteristics like unemployment, work intensity, inactivity, household size (and composition) and past poverty experience on the individual probabilities of poverty exit and entry. Despite their important effects on the individual probabilities of transitions, however, social benefits have a limited coverage among the vulnerable groups of the population, which strongly limits their aggregate impact on transition rates and poverty rates.