The interrelationships between the Europe 2020 social inclusion indicators

The aim of this paper is to analyse dynamically the three indicators of poverty
and social exclusion covered by the EU2020 poverty target, while focusing on state
dependence and feedback eects. We are interested in learning the extent to which
the fact of being at risk of poverty, severe material deprivation or low work intensity
in a given year is related to having the same status one year on, and whether
being at risk in one domain in one year is a predictor of being at risk in one of
the other domains in subsequent years. Our results indicate that the three social
indicators of the EU2020 strategy capture dierent aspects of economic hardship
in the majority of European countries analysed. We show that the three processes
are aected by a considerable degree of genuine state dependence, but there is weak
evidence for one-year lagged feedback eects | apart from in the Central-Eastern
European countries, where feedback loops between the three segments are to be
found. Mostly, interrelationships occur via current eects, initial conditions and
correlated unobserved heterogeneity. In terms of policy implications, our results
suggest that the three phenomena should be addressed by dierent interventions
while it is expected that spill-over eects across time will be marginal.