Excessive Social Imbalances and the Performance of Welfare States in the EU

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Page 2 of 73 EUROFORUM Within the ‘Euroforum’ framework KU Leuven academics present policy papers on Europe 2020 targets (employment social inclusion climate education and innovation) Eurozone’s design problems in interaction with policymakers from European Commission international experts Policy by Euroforum Leuven: 1 Paul De Grauwe ‘Design Failures Eurozone: Can They Be Fixed?’ (April 2013) Maarten Goos Anna Salomons & Marieke Vandeweyer ‘Job Polarization During Great Recession Beyond’ 3 Frank Vandenbroucke Ron Diris Gerlinde Verbist ‘Excessive Social Imbalances Performance Welfare States EU’ 4 Erik Schokkaert Koen Decancq ‘Beyond GDP: Measuring Progress Europe’ 5 Schoukens ‘From Soft Monitoring to Enforceable Action: A Quest for New Legal Approaches EU Fight against Exclusion’ is part interdisciplinary think-tank Metaforum which aims strengthen Leuven’s involvement debate supporting multidisciplinary working groups researchers different disciplines combine their scientific expertise discuss relevant issues angles Interdisciplinary Hollands College Damiaanplein 9 bus 5009 3000 metaforum@rec kuleuven be www be/metaforum be/euroforum ABSTRACT Our paper4 starts premise that disparity lack convergence levels child poverty Eurozone signals ‘excessive imbalances’ should a common concern Increasing diverging rates warrant first because they contradict expectation deepening integration leads growing cohesion at national panEuropean level second signal investment deficits may cause effect vicious circle underperforming labour markets systems The empirical paper develop an ‘efficiency scoreboard’ member states’ performance based observable regard ‘efficiency-benchmarks’ take into account spending (distinguishing pension other spending) household employment ‘pro-poorness’ With we distinguish measure ‘work poverty’ (which correlates i e care active market policies) ‘relative severity work reflects polarization unequal distribution jobs over households) pro-poorness upshot our research it confirms recent publications question so-called Korpi-Palme ‘paradox redistribution’ without however showing propoorness transfers (other than pensions) adds efficiency Although impact these indicators statistically significant still leave substantial unexplained disparities welfare states On structural differences underlying societal fabric correlate architecture GDP per capita but are not readily ‘explained’ factors strongly each other) result shows analyzing incremental changes policies must conflated across We thank Tim Goedemé Aaron Vanden Heede Vincent Corluy preparation data discussion basis SILC Pierre Pestieau Olaf van Vliet Rudi Van Dam Jonathan Zeitlin Maurizio Ferrera Johan Deken Bea Cantillon Karel den Bosch Anton Hemerijck Olivier Bontout Georg Fischer participants informal seminars CSB critical comments CONTENTS Abstract Introduction Excessive imbalances 8 divergence threatens legitimacy B needs basic consensus 11 C one apply notion states? 15 D Preliminary conclusions 19 Mapping 20 relevance intensity patterns 21 Household at-risk-of-poverty rates: decomposing diversity 23 24 employment: regression analysis 27 E explanatory power human capital demographic dependency 32 F An 35 G Caveats 39 General 41 References 45 6 Appendix 1: according vs ESSPROS 48 7 2: Model selection sensitivity 3: Summary statistics 51 Figures tables 52 INTRODUCTION Union (EU) has adopted surveillance mechanism prevent correct macroeconomic within ‘Macro-economic Imbalance Procedure’ (MIP) It relies alert system uses scoreboard in-depth country studies strict rules form enforcement financial sanctions euro area do follow up recommendations approach encompasses ‘early warning’ ‘preventive corrective action’ In section this argue analytically imbalance’ also applies specific parameters characterizing members This say identical concept would domain or MIP-type procedures developed (in fact whether MIP provides toolbox economic itself debatable requires separate discussion) However expression adequately describes set affect very differently (thus creating ‘imbalances’) matter all Youth unemployment two examples where These simply ‘similar problems’ subset poorly performing states: partly attributable shared causes pan-European level; create problem ‘spill-overs’ single countries thus generating consequences illustrate argument case But reasoning can extended youth even more straightforward successful reduction such excessive involves both responsibility collective action legitimate consider individual as responsible improvement outcomes enhancing Simultaneously provide supportive enables improve Balancing support implies sense ‘reciprocity’ presupposes understanding contributing state Not surprisingly emerge key refine early warning system: established consisting ten covering major sources For indicator thresholds have been detect potential applied mechanically complemented reading composition evolve time aim trigger order determine identified early-warning benign problematic organize missions ECB if appropriate reviews shall made public Preventive action: allows Council adopt preventive under article 121 Treaty stage before become large There arm serious cases imbalance procedure (EIP) opened Member State concerned will submit plan clear roadmap deadlines implementing Surveillance stepped regular progress reports submitted distinguishing role excluding pensions hand hand; although ‘income smoothing’ life cycle de facto non-negligible number Secondly degree (i share individuals living households relatively weak participation market) ‘severity’ poverty; measures ‘polarization’ reveal strikingly disparate pattern Analyzing contribute needed balance start hypothesis conceptually meaningful ‘performance’ (social outcomes) ‘efficiency’ loosely define ‘performance unit input’) substantiate conceptual distinction robust results Nevertheless believe type helpful inspire ‘contractual approach’ governance proposed President Herman Rompuy necessary inform contractual operational fair ventures debates engage academic scholars about ‘targeting’ benefits versus universalism strengths weaknesses ‘social investment’ Targeted directed (sometimes disproportionately sometimes exclusively) people low incomes whereas universal provided most citizens Prima facie targeted programmes efficient achieving redistribution since yields greater seminal Korpi Palme (1998) tabled evidence reflecting realities mid 1980’s show prima deceptive: ‘The target poor only equality via equal less likely reduce inequality’ (p 682) coined ‘the paradox explained following trade-off: low-income targeting weaker middle class smaller size redistributive budget cannot establish link between them (since no when controlled indicators; yet does play role) imply further questioning reversal paradox: today comparing 29 overall outcome (excluding positively ‘propoorness’ line pretend close One might object table cross-country comparisons given moments time; overlook trend decreasing associated positive correlations hold examined separately aggregating transfer fundamentally change correlation aggregate below combined phenomenon increased emphasis shrinking budgets Moreover observe ex post necessarily linked ante practices means-testing lead nuanced merits drawbacks lend pragmatic Commission’s Communication Investment Package calls ‘improved targeting’ emphasizes ‘both selectivity need used intelligent way ’ (European 2013b p 9) paradigm’ now promoted 2013b) (see Palier pact 2011) scholarly – advocates (2013) Morel (2012) approaches (2011) confronted difficulties difficulty follows intrinsic limitations nature involved assessing clearly confirm negative (defined simple suggest plays important mediated employment; yield decisive ‘proof’ reasons Section counterargument learns attempts quantitative deliver hard proofs; addition fine-grained qualitative intertemporal Much confusion caused unwarranted conflation perspectives By example perhaps ought explain how contemporary Sweden continue rank quite well terms perspective followed rather inegalitarian course half past decade Factors accounting Scandinavian ‘superiority’ (relative Europe) preventing some shifting outstanding (more so states) changing models remedy weakness require deeper analysis; hope introduced least building blocks useful why point particular underscoring difference (the poverty) ‘models’ see Kvist Greve who ‘classical typologies revision’ ‘profound [in Danish state] taken place core characteristics new structures understandings developing econometric examination (changes in) (linked paradigm) Wang EXCESSIVE SOCIAL IMBALANCES IN THE EUROZONE DIVERGENCE THREATENS LEGITIMACY OF focus Table presents figures at-risk-ofpoverty age 18 available 2005 2011 Statistics Income Living Conditions (EU SILC) years ‘2005’ ‘2011’ etc refer survey years; except United Kingdom Ireland reflect year Hence essentially relating 2004 2010 Throughout use ‘child shortcut crucial parameter assessment ‘poverty’ defined caution Being risk means equivalized8 net disposable income 60 cent median equivalized sharing resources rate here crude headcount: threshold depth faced headcount defines relation happens living: relative If floating columns (1-4) every decreased during crisis decrease incomes: favourable many families non-poor alike Columns (5-6) anchoring its value picture Finland Slovenia Slovakia Latvia instance calculation (compare 7-8) words inequality was rising 2000s; children same period substantially Italy Greece contrast increase larger fixed compared threshold; Spain similar counts [Table here] ranked Membership (as 2012) indicated grey shade huge ranges 10% 3% Poland Romania higher did include Romania) much ranging 2% Lisbon era discussed (forthcoming) modified OECD scale gives adult 0 subsequent adults children; somebody younger 14 consideration display risks non-elderly population Column (4) ratio total ratios indicate country-specific Across states10 average11 123% small (Denmark Norway Germany Sweden) 105% Denmark outliers seem highly specialized another 135% (Spain diverse six explaining child-centred 2000s displayed tendency converge measured (to lesser extent) anchored 12 were initially high Lithuania Portugal UK Estonia declined traditionally there notable exceptions (low initial increase) (high increasing rates) 13 contrary dispersion calculated ‘convergence’ ‘divergence’ technical When comes neither nor se desirable obtains describing satisfactory affairs non-convergence (during time) (child) appears cause: hit 2008 Figure plots growth column averages registered 2005-2011 10 EU27 Iceland term ‘average’ invariably refers unweighted average unless otherwise Child estimates statistical confidence intervals around them; hence shown Since user base disposal moment writing annual report Protection Committee 2012 rule thumb (on threshold): considers [-1;+1] interval (Social 2013 35) beta-convergence: negatively compare standard deviation increases correlated (SILC 2009) [Figure obvious strong ‘fixed’ 16 development indicator: poorer increases; richer decreases long-term good hardship experienced short run illustrates driver notwithstanding differ: shock accompanied (anchored witness combination signalling macro-economic domestic differentiation ‘homework’ note percentage increases: points differ suffered decline unchanged (-0 points) To extent shocks far perfect recession Jenkins et al pp 38-40) apart factor heterogeneity developments incomes; latter captured covered variables: real mean As Bourguignon (2003) ‘growth spells’ 17 severely already had mid-2000s paragraph general confined largely Bourguignon’s reported request Common next consequences: generate ‘externalities’ main spill-over realm political project crucially objective successive waves enlargement promise vindicated Enlargements Community resulted upward convergence; World Bank dubbed EC veritable ‘convergence machine’ (Gill Raiser 2012); documented convincingly Lefebvre current phase casu creation currency stake Apart suffering those feature notably continues steadily undermine credibility perceived ‘losers’ process ‘winners’ Both ‘failing’ ‘successful’ opinion increasingly dissatisfied observation Reasoning ‘us’ ‘them’ South’ North’ inevitably gain while lose ‘us’-‘them’ divide particularly paralyzing North framed efficiency’: disappointing record seen socially inefficient economically uncompetitive make difficult steps consolidate longer sovereign debt stabilizing fiscal let alone fully-fledged union necessity union) know sustain entities mutual trust other’s internal fabric: Belgium north-south telling seems harder parties agree reason seriously try understand what indeed inefficiencies done erodes cooperation exists damages trust-based perform better future hypothetical subjective: prejudge certainty sufficiently plausible assign label observations summarized NEEDS BASIC CONSENSUS previous equally surging reason: creates objectively sustainability write ‘can’ depends analytical monetary unification demand ‘symmetry’ among economies participating wish propose minor detour beneficial adequate symmetry flexibility (De textbook theory optimal areas output Flexibility relates wage interregional mobility country’s ‘internal’ adjustment capacity event asymmetric Less necessitates flexibility: required adaptability Monetary (EMU) assessed balances export shares exchange costs government private housing prices properly attuned union; direction ensures related rarely explicitly answered functionally equivalent view symmetry) produce times generated arrangements: temporary shorter hours (such Germany) worker unregulated forth Financially sustainable older workers generous secure lower regional compatible supranational possibility ‘functionally equivalent’ legitimize principle subsidiarity limits accommodated (2012a) discusses policy: economy practice divergences retirement pose assertion true then whole gamut model pursue domestically ‘if’ preceding sentence ‘if’: proofs matters remains unproven tuning strategies certainly outlined supranationally shaped neatly separated arenas naïve position Leibfried long argued respect (Leibfried 2010) Let us return absence (upward) alarming ‘upstream’ (why comparatively X?) ‘downstream’ (what worsening Upstream functioning jobless turn cost competitiveness and/or Downstream makes success obtain cultural status school upstream underinvestment inadequate mobilization announces continuing synonymous deficit Today formal educational achievements OECD’s PISA programme get trapped (a ‘bad equilibrium’) persistent reinforces legitimacy-based formulated section: emergence participate fabrics obviously causal runs well-documented briefly explore relations Several especially detrimental long-run effects several (Cunha 2006; Cunha Heckman Schennach Early learning foundation throughout proper stimulation harmful Brooks-Gunn Duncan (1997) family children’s completed schooling largest 0-5 insignificant later students underrepresented college attendants weakly finances enrol readiness due (Cameron 1999) Families access schools opportunities offspring literature demonstrates bad health crime earnings Almlund Duckworth Kautz Borghans Ter Weel extensive overviews investments broad meaning field comprise assistance parents (and peers) non-monetary Bianchi Robinson Milkie (2006) collegeeducated mothers spend enrichment activities ) Still purely influence go beyond asymmetries cautious formulation argument: benefit fabric’ ‘economic symmetry’ neutral: envisaged choice benchmarks organising recommended subsidiarity’ elusive claims serves That broader demands sketched paragraphs types ‘internal flexibility’ purport survive meets requirements justice authors claim limited: dimension broad-based tie goals often stressed impossible accurately (e g Sapir 2006) Nonetheless reality minimal normatively charged objectives Subsequently complex reciprocity dealing At inter-human relationships cohesive agent (Bowles summarised Editorial Constitutional Law Review WTE DN evidently various intertwined What ‘individual’ evolution? end jointly organised mechanisms transfers)? Should adhere strictly principled morality (whereby ‘sinners’ face punishment sins merit) consequentialist moral (duly excessively sinners saints trouble)? presupposition themselves interest having well-performing EU’s actions undertaken enhance CAN ONE APPLY NOTION EFFICIENCY TO WELFARE STATES? security discussions Is opposed performance? definition achieves input’ influenced context operates; parcel friendly: former ‘efficient’ carries meanings revisit usage analyses arrangements well-known arguments other: trade-off ‘equality’ compellingly ‘leaky bucket’ metaphor Okun’s famous essay Equality Efficiency Big Trade-Off (Okun 1975) leaky bucket anticipated insights formalized taxation whereby fund schemes worst-off incentives overcoming imperfections information compulsory pooling insurance) incompleteness organizing Pareto-improvements classic Barr Economics (Barr insurance just examines kind Paretian efficiencyargument (or apply) intervention (because information) holds second-best world counterfactual Pareto-efficient ‘possibility frontier’ exist could first-best lump sum redistribute improved thanks interventions allowing Thus mainstream teaches nation conceived instruments implemented top Global Competitiveness Index 2012-2013 finds archetypal Nordic continental Netherlands together liberal USA (World Economic Forum 13) mature simultaneously competitive prosperous inspired impressive body goes possible prosperity ‘feedback-effects’ society encouragement sound risk-taking well-designed : productive asset forceful restatement Hemerijck’s Changing (Hemerijck underscores ones assets states; he explains tradition automatic stabilizers institutions (notably progressive dampen maintain production frontier Obviously come function sustainably certain conditions avoiding Andersen Dolls (Dolls 2012; Basso Boeri (2009) underscore dualism importance “both stabilisers protection job loss operate efficiently market” ‘productive assets’ others equipped stabilization emerges: considered qua asset’ ‘automatic stabilizer’ sensu stricto Admittedly impressionistic Also causality wrong stabilizers’ beneficiary lato narrowed down ‘performs better’ ‘comparatively efficient’ benchmark preferences achieved ‘per spending’ constructing ‘best best ‘outputs’ policy) ‘input’ ‘euros spent’ ‘one government’ distance technique respects interesting global reject application aggregation First inputs outputs too Second disentangle ‘merit’ (attributed ‘circumstances’ control) accept sceptical think taking ‘poverty elderly’ carry normative benchmarking exercise accepted framework: EU-wide clarity ‘preferences’ persist; justifies specify ‘inputs’ controlling Such insight volume dissociated influencing sensible partition circumstances totally control governments attributed unambiguously therefore differentiated political) deliberation ‘circumstances control’ ‘policy merits’ whatever judgement ‘responsible’ achieve Pareto-efficiency said Pareto-inefficient Assessing interdependencies (child trade- Sapir’s equity (Sapir offs complementarities; Rather productivity conditional etcetera convenience ‘achieved outcomes’ called ‘post-transfer referred ‘reduction transfers’ Poverty post-transfer pretransfer Eurostat method calculate ‘pre-transfer proceeds follows: taxes excluded results; rates’ using ‘post-transfer’ read obtained adapted funding added Third manipulation behavioural induced abandoning concomitant reductions significance equilibrium created financing reference tax Because neglected interpret relationship appear performs ‘efficiently’ amount reduction’ reduction/spending’ inactivity traps pre-transfer comparative misleading remedying final differs Employment Development 2013a 219-226) ‘gross spent’; ‘gross’ analyse congenial employment) Before insist caveat: productivity) virtue Consider B; spends ranks prefer ‘Efficiency’ criterion choosing situation definitely spill-overs large) informs possibilities PRELIMINARY CONCLUSIONS Growing threaten (social) orientation (i) feedback (ii) prime (nor any activity) wellconceived examine give notions substance reproduce Doing Better (OECD Starting Strong slightly consists applying criteria assess Lancker feasible gathered Statistical System variables SILC-based incorporate assessments ‘comparative efficiency’ MAPPING PERFORMANCE AND EUROPEAN STATES illustrated interrelation ‘anchored time’ threshold: focuses distributive issue introduce map decompose ‘shift-share analysis’ rough indication variable From onwards time-pooled crosssection Sections A-C 2011; limit ourselves 2005-SILC 2010; retrieved dependent includes predominantly 22 explanations mapping association features Separating growth’ distribution’ unrelated below) Conversely formation Explicitly focussing including RELEVANCE HOUSEHOLD WORK INTENSITY PATTERNS EMPLOYMENT ‘household intensity’ months worked working-age students) persons part-time estimate full-time equivalents computed habitually interview work-intensity belong weighted five subsets 2008: distinguishes (work-intensity 85 100 cent) (between 55 medium workintensity (20 less) cent; (69 determinant shift attention state’s determined households? three employment’ 18) cent); ‘very poor’ less); work-poor ‘severe workpoor third subgroup households; call reader expressions values pre- post-crisis Among 20% 40% prevalence headcounts Labour Force Survey (LFS) Cross-country known 2013; surprise displaying 2000- immediate span suggesting really ‘stock’ efforts accumulated one-way causality: investing (ALMP) Additionally mainly Indeed exclude originates effectiveness expenditure disadvantaged Blau Currie rich overview subsidizing direct impacts range later-life Spending extremely tell Given static providing behind again tends Southern positions Northern existence ‘natural floor’ severe easily (all combined) expenditures day averaged 2000-2009 All expressed (n=29) diminish: fall inversely explanation (‘severe poverty’) varies great deal differences: ‘extended families’ ‘pooling’ nonemployment work-poverty non-employment everything: labelled (Gregg Scutella Wadsworth Using ‘jobless household’ ILO weeks survey) ‘polarization index’ actual structure assuming distributed randomly Traditionally EU15 Belgium; family’ index lived expect structure) 2005-2010 Contrary construction captures something else institutional socio-cultural determinants demonstrate AT-RISK-OF-POVERTY RATES: DECOMPOSING DIVERSITY subgroups accounted subgroups) identical) Decomposition basically device descriptions decomposition outbreak ‘work-rich’) segment work-rich shift-share presentation elements (For full 2012b) horizontal lines ‘work-poverty’ suggests conclusions: – Countries characterized infer ‘trade-off’ macro-level comparison: group Relatively considerable right side Eastern SPENDING administrative published classification gauge gross regime benefits; tend overestimate like France (Adema Chart I 11) Another allow 25 sets data: standardized25 standardized 60;26 60; cash old survivor 2007 restricted (including elderly) classified percentages explainable factors: contains numerator denominator whilst wages salaries) Hungary deviate sense) Next correspondence complicated profiles older: overestimates Bulgaria 60% standardization equivalence footnote 8) site rely 26 bracket [0-59] [0-64] fits evolutions (except Ireland) Developments pensions’ multigenerational 40 222) underestimates effort thoroughly ‘big spenders’ transfers; adding ‘spending nation’ becomes comparable sampling coherent 7) sizes Therefore choose employ aged 0-59 0-17 Sensitivity employing either instead 28 Aside ‘pro-poorness Matsaganis roughly concentration coefficient receive register Calculating coefficients indicates components irrespective Concentration Gini disproportionally pro-poorness: ‘strongly pro-poor’; zero ‘weakly pro-poor’ Weak going parts represent reverse scale: -1*concentration 30 units last Whiteford (2010) comparison found Marx ranking broadly pro-poorness; -1*Gini correspond age-specific 31 summary benefiting inverse coefficients) plus figure pro-poor towards 0- 59 High prevalent Anglo-Saxon simplicity (inverse of) Ginicoefficients population; (small) ‘prorich’ RATES ON EMPLOYMENT: REGRESSION ANALYSIS step pooled time-series cross independent description) SILC: Pro-poorness Analogous located entire population) executed specifications controls Results (they fit covers surveys panel-based linear GLS heteroskedastic error methodological presented dummies alternative ‘country effects’ not) drawback ‘underlying society’ country-level picked leading overestimation rates; upper bound absolute estimated Including advantage fabric) underestimation deep automatically along specification choices addresses estimation methods frames emphasize ‘explain’ summarizes four regressions atrisk-of-poverty fourth 2] regress 33 encompass Without sign negative) downward bias records Pension poor-performing distortions corrected extract effects; pick dimensions boom joint movement Changes partially compensate business observed add (partially) weight (slightly 34 (work work-poverty’) study concurs typically corresponding elaboration How model? contain Primarily dividing through logs levels; (with confirmed fitting above- below-average significantly baseline lies interpretation Naturally holding constant held More precisely divided original ‘smoothly’ [0-55] Again informative giving magnitudes occurs [20-55] margin model; consistent idea stress act 70 suggested Alternatively 158 148 respectively modest comparably variation transitions being moderately moderate at-risk 45-0 55) mentioned drives Interpreting reduces spent effective addressing 36 significant: magnitude wonder appendix conclude reducing (also poverty: 37 (0-55) looking naturally 38 Note (marginally) error) look prominent expense pay) Evolutions evolution (Corluy surprising directly 1-1 opposite insignificance Transfers (higher) non-linearity incentivized self-providing actually person bigger moves away self-dependent Effects reflected preand factored out subtract robustness apparent address (appendix elaborates this) invariant (groups technology periods EXPLANATORY POWER HUMAN CAPITAL INVESTMENT DEMOGRAPHIC DEPENDENCY help earlier 2009 ALMP test indicators: attainment educated individuals) achievement deviations PISA-test score topics countries) country-average topics) PPP) young common: (although practice) questions itself; review additional dynamic achievement) panel unfeasible (results shade) distinguished none sensitive somewhat stronger endogenous effects) (not shown) (correlational) findings suffices markedly Turning majority anymore portrayed estimating few draw regarding (net thereby remarkably And repeated lag arbitrary making unsuitable 41The incorporates opposing forces Most (we F) implausible underlines improper keep mind ‘naïve’ (lack connection invests suffer Finally cross-correlations mid-1980s settle 42 ‘paradox’ Kenworthy replicate methodology find disappeared coverage disappearance receives programs aimed low-paid eighties means-tested designed non-working Yet advocated conviction selective forcefully cited assertions ‘services services’ (Titmuss 1969) ‘programs programs’ (Rainwater 1982 42) ‘good program shrinkage’ (Grosh 1992) entertain logic complimentary: introductory Mechelen Pintelon pondering 43 AN ‘EFFICIENCY SCOREBOARD’ WITH REGARD Some feeble Other listed visualize Benchmark measure: lists sample (EU27 Norway) demeaned large; states44 Central states45 Southern46 nations47 above efficiencies’ predicted over- underperforms ‘An caveat generosity universalism/targeting usually totality parental Aspects deployed segments classes willing pay resonates depending considering Long-term after affecting primarily skilled ethnic minorities socio-economically vulnerable higher-skilled exposed unlikely willingness pay; pertinent ‘new’ evenly parenthood life) expected pressures unemployment) leave’ (Cantillon forthcoming) 44 Referring Czech Republic 46 47 ‘residual’ once always benchmarked interested construct artificial anchor squared minimized resemble residuals benchmarks’: Here solve problem: intensity; impute minimizes errors imputed moving 49 compensates vice versa correcting percent compensated Malta ‘residuals’ Cyprus establishes ‘conditional gauges conceal employment-friendly liable criticism spending: enhances organization repairing firmly nevertheless variance generally dynamics Many completely Correcting negligible 50 swings state51 (conditionally) turns ‘inefficient’ (benchmark D) saw pro-rich accounts efficiencies visible cancelled express importantly Transfer Adding corrections loglinear (conditional) graph axis (linear) strong: Put systematically (normal) A4) high-spending insignificantly 65 logs) almost Luxemburg outlier 53 10] 11] portrays countrylevel heavy (pensionheaviness population54) achievers remain heavily interrelated ‘true’ ‘unexplained’ (This effect: (nonpension) incentivize live answer ‘what affects unchanged?’ panel; ceteris paribus 56 5] extremes drops 54 macro ‘political economy’ oriented striking exploration disappears character jump constitute conclusive Furthermore depend remaining puzzles wide played macro-data student convincing 57 primary secondary (Gini) (Bergh Fink Sylwester 2002) 58 Altogether returns childhood ‘investment deficit’ cut deficit; little doubt ingredient extra cuts CAVEATS identify vast nations badly leaves intact Poor puzzling Class (Card Kruger 1996) 1-2% per-pupil Hanushek concludes Woessman scores Institutional presence central exam autonomy scrutiny students’ teacher freedom teaching worthwhile incorporated strongest (when criterion) unobserved unsatisfactory tested universally Naïve estimations multiple (transfer) similarly addressed improvements Despite cautionary notes element agenda: judgments pervade debate: informed facts perception caveats conceptualization possibly insecurity promoting gender equality) specifically Theoretically income; ideally gap concerns sense: (that does) anything time: diminished reasons: immediately vis-à-vis uniform ‘European technology’ encompassing histories exclusion Even mini-states lightly affected moreover raises host problems: virtual drawing collected observer nonetheless enjoys popular middle-class cast size; refuting politically term; fifth rejoinder Pestieau’s introducing judging influences aspect changed Tax quality accessibility activation proven fight joblessness contributed homogamy partners contributes polarization) limited GENERAL Macro-economic Procedure level: showed legitimacy: represents Legitimacy systems; essential input observers economists deeply worried Huge root differential trajectories mid-2000’s cushioning homework raise embody ‘contracts’ instantiate burden processes puts ‘strong’ ‘weak’ unimportant puzzle simplistic bring aspects makers supported demonstrated 1980s contribution ‘naïve regression’ correctly convincingly; par excellence While ‘unexplained disparity’ remarkable finding contradictory sight endogenous) dependence non-pension foretells doomed diminish cross-correlation fighting well-organized complementary emphasized panacea ills eschew easy rhetoric ‘win-win policies’ tensions conflicts arise pursuing narrow budgetary margins disequilibria offer substantive purpose EU) favour marks discourse corollary survival recalibration conjure democratic predicament put challenge medium-term consolidation mutually balanced coordination serve goal constructive Conditional tangible reforms inclusive removed top-down all’ policy-making of: room manoeuver opt strategy; guidance stringent constraining well-defined genuine scope ways elaborate clear: reformist acquis cherish credible agenda highest REFERENCES Adema W P Fron M Ladaique Really Expensive? 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Dutch ESPAnet October Rotterdam Australian Tax-Transfer System: Architecture Outcomes Record 86 275: 528-544 Schooling Bulletin 117-170 APPENDIX ACCORDING VS BASIS A1 A2 Feseau micro-survey entirely (like register) (2008)) collection investigates regarded correct) salaries National Accounts categories considerably self-employment (especially occupational ‘housing benefits’ elderly ‘pensions’ trying match micro (Feseau MODEL SELECTION SENSITIVITY tests (heterosekdasticity serial contemporaneous decision evaluated case-to-case typical Podesta (2002 example) exactly spenders pensions; cyclical frame (2009-2010) 2005-2008 contaminated affordable consistently crises; pressure occurred continuously underestimate assumed impact) Initial renders restrict pre-crisis (referring 2005-2008) deteriorating Measures imposed cumbersome reduced controllable want answering execute fully samples missing A1] biggest Standard specified lagged marginally sensitive) included dropping drop (early Presumably A2] (low) (outliers (small (Scandinavian records) omissions stable uphold SUMMARY STATISTICS Tables A3 A4 employed indicators) A3] A4] FIGURES TABLES Levels (2005-2011) Source: Website accessed relate GEO/TIME % AROP Floating Fixed (1) (2) (3) (5) (6) (7) (8) (9) (10) 95% -3 -0 106% -1 86% -2 115% 101% 117% -5 118% Austria 127% -4 144% 147% -9 128% 143% -14 138% Luxembourg 132% -12 119% -6 130% 131% 121% -16 124% -7 -21 Threshold At-risk-of-poverty [0-17]: Change 2008-2011 threshold) 2008-2010 cz dk ee ie gr es cy lv lt lu hu mt nl pl pt si sk fi uk y = 2071x 0935 R² 5981 -60% -40% -20% 0% 80% 100% 120% -15% -10% -5% 5% Percentage 2009-SILC exc IE UK) 2010/2008 ‘fixed’ GDP/capita 2009-2011) Lineair (2008-2010 2009-2011)) Very wi [0 85-1] 55-0 85] Medium 45- 55] Low 2-0 45] [0-0 [0-17] (wi) + pre-and Work 2004-2009; 2005-2006 IS SI SE DK NO SK LI FI PT LV CY ET NL FR BE PL CZ RO ES LU AU GR BG DE HU IT MT (0-100) Pre-crisis (2005-2008) Post-crisis (over 2005-2010) indices Severity Abs vertical (for segment) 00 Key hh programmes) EUROSTAT 15% 25% 30% eq 2008; (working-age GDP; 2007) Pensions 35% Age Cash Benefits Main (fixed model) Note: (AROP) Controls 0-55) (very 0-20) (PP PP Dependent (AROP_wp) (AROP_wr) (pov_red) reduction; comprising 2004-2010 [SILC 2005-2010] 2004-2009 until complete 165 Relative 075 (0 076) 016 223) 226*** 071) 53*** 397) 22*** 194) 235*** 274* 165) 70*** 412) 26*** 202) 233*** 081) 429*** 172) 85*** 413) 19*** 987 (2 10) 66** 795) 831*** 127) 363 422) 56*** 787) 92*** 428) 982*** 163) 624 437) 13** 840) 87*** 417) (3 81) 67* 0028 054) 335*** 126) 46*** 313) 318** 153) 028 058) 326** 154) 54*** 318) 345** 683 (1 407 595) Pov Red (excl 15*** 052) 35*** 070) 06*** 294) 394** 189) 24*** 62) (incl 063) 07*** 201) 36*** 798*** 196) 900*** 337) 661*** 214) 20*** 85) 254 61 available) AT EE LT gini disp pop 62 Impact Rel X1 X2 Base 71*** 195) Add 242*** 072) 159) 408) 197) 000082 000077) 220*** 140 192) 52*** 398) 200) 202 (young/old) 221*** 202*** 174) 89*** 416) 02*** 382** 160) 203 198) 474** 187) 23*** 586) 19* 705) 415*** 48*** 381) 720) 30*** 694) 367 594) 525*** 164) 33*** 328) 63*** 592) 570 667) 178 110) 503*** 39*** 03*** 670) 712 790) 526** 259) (indicated table) (internal inequality) lowly purchasing parity Dependency referring 64 15-64 0-14 (source: Eurostat) Correlations SumTP WP Sev sev PPT pens GDP/0063 DR_Y DR_O Educ Ed Ac 372*** Sum Trans+Pens 893*** 086 087 219*** 014 Severe pov 378*** 0020 405*** 550*** 535*** 204*** 476*** 106 744*** 409*** 284*** 301*** 012 347*** 417*** 142* 057 125 129* 160** 141* 011 GDP/cap 344*** 619*** 069 115 148* 054 318*** Dep rat 386*** 515*** 165** 036 312*** 419*** 238*** 555*** 026 197*** 124 032 018 211*** 264*** 023 388*** att 393*** 208** 329*** 358*** 103 027 150* Soc inv 506*** 601*** 239 604*** 170 361* 279 113 167 591*** 066 237 Ineq 195 306 043 021 198 235 130 034 291 111 045 409** ach 112 387** 089 305 364* 184 081 127 068 080 285 329* 192 487*** 672*** 197** 510*** 253*** 128* 380*** 096 394*** 471*** 139* 316*** 715*** 328 508*** 436*** 574*** 189** 030 145* 156** 509*** 495*** 174** 088 493*** 334 423** 749*** (educational investment) 0-17; poor; rel 0-59; capita; ratio; dep educ (share educated/share educated); soc labor policy; ineq scores; PISA; Country [0-17]; additionally -10 w r t (performance) (measures efficiency) displays (efficiency pro-poorness) au bu fr ic la li ro 10000 20000 30000 40000 50000 60000 70000 Mean Residuals 66 propoorness) lali 67 (no breakdown (ISCED 5- 6) 0-2) Internal (unemployment sickness disability non-elsewhere exclusion) LU= Regression WI) WI; reduced) 513*** 142 205) 250 225) 206) 825*** 99*** 14*** 589) 16*** 539) 647*** 528 508) 675) 025 573) 471** 000027 00015) 0000029 000050 00013) capita: 768*** 57** (5 96) 83** (6 29) 84** 99) 101 72 48) (7 09) 68) 240 354 15) 274 40) 505*** 287) 258 314) 457** 405** 452** 860 901) 711 723) 722 868) 05 763) 68 00% 02% 04% 06% 08% 12% 14% 16% 18% 02 04 06 08 (Eurostat) Esspros SILC2008; 45° (Esspros transfers) 69 PLPT 05% survivors A1: Lagged Baseline 429** 046) 40*** 068) Pooled OLS 478*** 138) OLS: 357*** 107) 208 292) 129** 050) 201* 111) 752*** 047) Random 469*** 084) 699*** 224) dummies) 288*** 098) 264 293) Differences 099) 802*** GLS: Correct autocorrelation 228*** 064) 122 Panel 230*** 048) 114 124) dropped (within) estimator correction *Significant **significant ***significant 1% 71 A2: Drop 224*** 080) 406*** 149) 978*** 176) 647 435) 100* 424** 179) 42*** 085) 610*** 209) 170** 407** 170) 790*** 466) 111* 061) 240* 133) 088) 750*** 322) 273 992*** 181) 561 480) 0037 044) 259* 155) 087) 804*** 210) 086) 499*** 177) 17*** 171) 715 515) 247 066) 188** 265 865*** 686 441) 029 233 07d) 814*** 401*** 091) 323 245) 162) 084 529) 067 764*** 760*** 2009-2010 491*** 090) 496** 231) 147) 214 0042 090 552** 253) 829*** 203** 083) 470** 175) 055 557) 0087 062) 445*** 169) 082) 885*** 228) 152* 358** 892*** 180) 674 504) 060) 187 173) 078) 624*** IC 304*** 745* 411) 061 057) 349** 27*** 901*** FE 271*** 089) 556*** 08*** 855** 394) 035 059) 388** 158) 34*** 075) 786*** 207) A3: Non-elderly Pre-transfer Reduction 87 10914 07 88 735 9958 2665 93 75 98 03 10580 Rep 74 5423 79 82 91 146 10224 3989 09 9513 9761 90 895 10183 77 7062 81 92 3825 80 84 11701 10140 8761 3444 3446 16156 97 7662 01 604 10724 76 815 076 3714 5439 1938 95 7859 7862 630 10016 Un 10672 A4: Ind Att Structure 180 899 150 280 194 079 0055 0038 217 675 99 059 257 143 190 065 072 156 951 040 077 022 176 044 141 185 094 883 89 147 189 94 591 134 145 050 790 109 311 163 717 191 056 152 788 126 157 091 0026 144 073 0029 175 680 201 060 259 169 033 149 083 062 133 252 405 098 154 070 172 729 153 615 128 0031 160 074 132 20-59 Indicators inverted See A6 description

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