Explaining Levels of Deprivation in the European Union

The usual yardstick upon which poverty is measured is relative income, that is, whether one is above or below a threshold set at some fraction of the average population income. However, the last decade has seen a growth in interest in the use of deprivation measures, particularly as an accompaniment to income thresholds. This move has gained increased momentum by the frequent finding that there is often little overlap between poverty measured in these different ways and moreover that the degree of mismatch may vary across countries. Such findings suggest that recent work, particularly in the German context (Leisering and Leibfried (1999)) suggesting that poverty is usually of short duration and a consequence of more transient events, may in fact be an artifact of an over-reliance on income based measures. Here we begin the process of unpacking the relationship between income and deprivation measures by examining the determinants of current lifestyle deprivation measured at the household level across twelve countries of the European Union. Using the comparative data available in the European Community Household Panel Survey (ECHP) we assess the extent to which country differences in levels of deprivation can be adequately explained by variation in the distribution and impact of particular individual and household characteristerics, or whether we must continue to make reference to persisting country effects. Using nested OLS models we first assess the extent to which variations in household structure and the levels of needs impacts on national differences in levels of deprivation and find that it has little impact. On the other hand, predictors of the household level of resources such as the head's labour market status, social class and educational level have clear effects across countries and also significantly reduce the level of country differences. The introduction of a model with country specific effects shows that a great deal of variation in the level of deprivation between Northern European countries can be explained via the effects of factors predicting the level of household resources particularly the social class and labour market status of the head of household. In the final iteration, we control for country variance in the distribution of income and assess the degree to which the effects of other covariates may act through income. Overall the paper shows that much of the variance in deprivation among Northern European nations can be accounted for using individual and household level characteristics and moreover that these have a consistent effect across countries. On the other hand, the Southern European nations Greece, Portugal, and Spain stand out as having high residual levels of deprivation that may well be the consequence of long term historical and developmental processes.