Poverty Dynamics: An Analysis of the 1994 and 1995 Waves of the European Community Household Panel Study

Recent poverty research internationally based on analysis of panel data has highlighted the importance of income dynamics. In this paper we study mobility into and out of relative income poverty from one year to the next, using data for twelve countries from the European Community Household Panel Survey (ECHP). The ECHP has unique potential as a harmonised dataset to serve as the basis for comparisons of income and poverty dynamics across countries, and here we begin exploiting this potential by analysing income poverty transitions from Wave 1 to Wave 2. As well as describing the extent of these transitions, we analyse the pattern by fitting log-linear and linear by linear models commonly employed in the analysis of social mobility. Our analysis shows that cross-national variation in short-term poverty dynamics is predominantly a consequence of shift rather then association effects. Models that constrain immobility and affinity effects to be constant across country but allow for variation in the distance between categories and the hierarchy effect provide a parsimonious statistical fit of the observed pattern of mobility.