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Poverty and the business cycle: A regional panel data analysis for Spain using alternative measures of unemployment

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Abstract

Conventional wisdom predicts that changes in the aggregate unemployment rate may significantly affect a country’s income distribution and, consequently, have a relevant impact on the evolution of its poverty rate. However, the relationship between labour macroeconomic indicators and poverty seems to have become weaker recently. Using panel data on unemployment and poverty for Spanish regions, we estimate a system GMM model to model this relationship using alternative measures of the unemployment rate. We also test the hypothesis of asymmetric effects of the business cycle on the share of poor individuals in the population. Our results show that unemployment has a positive impact on severe poverty, while inflation has a negative effect. We also highlight the extent to which results differ when alternative intra-household unemployment distribution-sensitive measures are considered. Regarding the existence of asymmetric business cycle effects on severe poverty, our results show that despite the fact that the Great Recession has had a strong and positive effect on severe poverty, the effects of expansions and recessions on poverty are not significantly different.

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Authors and Affiliations

  1. Facultad de Ciencias Jurídicas y Sociales, Universidad Rey Juan Carlos and Equalitas, Paseo de los Artilleros s/n, 28032, Madrid, Spain

    Luis Ayala

  2. Departamento de Economía, Facultad de Ciencias Económicas, Empresariales y Turismo, Universidad de Alcalá and Equalitas, Plaza de la Victoria s/n, 28802, Alcalá de Henares, Madrid, Spain

    Olga Cantó

  3. Departamento de Análisis Económico I, Universidad Complutense de Madrid and Equalitas, Campus de Somosaguas, 28223, Pozuelo de Alarcón, Madrid, Spain

    Juan G. Rodríguez

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  1. Luis Ayala
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  2. Olga Cantó
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  3. Juan G. Rodríguez
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Correspondence to Luis Ayala.

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Ayala, L., Cantó, O. & Rodríguez, J.G. Poverty and the business cycle: A regional panel data analysis for Spain using alternative measures of unemployment. J Econ Inequal 15, 47–73 (2017). https://doi.org/10.1007/s10888-016-9343-5

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  • DOI: https://doi.org/10.1007/s10888-016-9343-5

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