International Tax and Public Finance

, Volume 17, Issue 6, pp 662–685 | Cite as

Public transfers to the poor: is Europe really much more generous than the United States?



Fighting poverty is an important concern in most societies. This usually involves transferring resources to the poor. There exists a widespread view that European countries are much more generous to the poor than the United States. We study whether this is really the case. First, we argue that using data on aggregate spending does not allow us to conclude who the final recipients of social expenditure are. We then analyze microeconomic evidence from the Current Population Survey and the European Community Household Panel and find mixed results. In particular, when the concept of relative poverty is used, we find that every individual below the poverty line receives an average transfer in the United States that is 45% higher than in the European Union. When the old are excluded from the sample, this difference is reduced to 14%.


Poverty Public transfers Redistribution Welfare state 

JEL Classification

H51 H53 I38 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Adema, W., & Ladaique, M. (2005). Net social expenditure, 2005 edition: more comprehensive measures of social support. OECD Social, Employment and Migration Working Papers No. 29. Google Scholar
  2. Alesina, A., & Glaeser, E. (2004). Fighting poverty in the United States and Europe: a world of difference. London: Oxford University Press. CrossRefGoogle Scholar
  3. Alesina, A., Glaeser, E., & Sacerdote, B. (2001). Why doesn’t the United States have a European-style welfare state? Brookings papers on economic activity (pp. 187–278). Google Scholar
  4. Anderson, G., Reinhardt, U., Hussey, P., & Petrosyan, V. (2003). It’s the prices, stupid: why the United States is so different from other countries. Health Affairs, 22(3), 89–105. CrossRefGoogle Scholar
  5. Atkinson, A. B., Rainwater, L., & Smeeding, T. M. (1996). Income distribution in OECD countries. Paris: OECD. Google Scholar
  6. Burman, L., Geissler, Ch., & Toder, E. (2008). How big are total individual tax expenditures, and who benefits from them? American Economic Review, 98(2), 79–83. CrossRefGoogle Scholar
  7. Congressional Research Service (2004). Green book, committee on ways and means. Google Scholar
  8. DeNavas-Walt, C., Proctor, B., & Mills, R. (2004). Income, poverty, and health insurance coverage in the United States: 2003 (US Census Bureau, Current Population Reports, P60-226). US Government Printing Office. Washington, DC. Google Scholar
  9. Disney, R., & Johnson, P. (2001). Pension systems and retirement incomes across OECD countries. Cheltenham Glos: Edward Elgar. Google Scholar
  10. EPC, Economic Policy Committee (2001). Budgetary challenges posed by ageing populations: the impact of public spending on pensions, health and long-term care for the elderly and possible indicators of the long-term sustainability of public finances. European Commission. Google Scholar
  11. Eurostat (2008). European social statistics: social protection. Expenditures and receipts. Data 1995–2005. Google Scholar
  12. Feldstein, M. (1998). Income inequality and poverty. NBER Working Paper 6770. Google Scholar
  13. Feldstein, M. (2005). Rethinking social insurance. American Economic Review, 95(1), 1–24. CrossRefGoogle Scholar
  14. Garfinkel, I., Rainwater, L., & Smeeding, T. (2006). A re-examination of welfare states and inequality in rich nations: how in-kind transfers and indirect taxes change the story. Journal of Policy Analysis and Management, 25(4), 897–919. CrossRefGoogle Scholar
  15. Heady, C., Mitrakos, T., & Tsakloglou, P. (2001). The distributional impact of social transfers in the EU: evidence from the ECHP. Fiscal Studies, 22, 547–565. CrossRefGoogle Scholar
  16. Hoynes, H. W., Page, M. E., & Stevens, A. H. (2006). Poverty in America: trends and explanations. Journal of Economic Perspectives, 20(1), 47–68. CrossRefGoogle Scholar
  17. Jäntti, M., & Danziger, S. (2000). Income poverty in advanced countries. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook of income distribution (pp. 309–378). Amsterdam: Elsevier, Chap. 6. Google Scholar
  18. Moffit, R. A. (2003). Means-tested transfer programs in the United States. Chicago: University of Chicago Press. Google Scholar
  19. OECD (2006). OECD health data 2006. Google Scholar
  20. OECD (2007). Social expenditure database.
  21. Oliveira Martins, J., de la Maisonneuve, Ch., & Bjørnerud, S. (2006). Projecting OECD health and long-term care expenditures: what are the main drivers? OECD Economics Department Working Paper 477. Google Scholar
  22. Page, B. (1983). Who gets what from government. Berkeley: University of California Press. Google Scholar
  23. Pellikaan, F., & Westerhout, E. (2005). Alternative scenarios for health, life expectancy and social expenditure: the influence of living longer in better health on health care and pension expenditures and government finances in the EU. European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 8. Google Scholar
  24. Peterson, Ch., & Burton, R. (2008). The US health care spending: comparison with other OECD countries. New York: Nova Science Publishers. Google Scholar
  25. Sheils, J., & Haught, R. (2004). The cost of tax-exempt health benefits in 2004. Health Affairs, Data Watch, W4, 106–112. Google Scholar
  26. Smeeding, T. L. (2006). Poor people in rich countries: the United States in comparative perspective. Journal of Economic Perspectives, 20(1), 69–90. CrossRefGoogle Scholar
  27. Smeeding, T., Rainwater, L., & Burtless, G. (2002). United States poverty in a cross-national context. In S. Danziger & H. Haveman (Eds.), Understanding poverty (pp. 162–189). New York/Cambridge: Russell Sage Foundation/Harvard University Press, Chap. 5. Google Scholar
  28. Whitehouse, E. (2003). The value of pension entitlements: a model of nine. OECD countries. OECD Social, Employment, and Migration Working Papers 9, OECD. Google Scholar
  29. Woolhandler, S., & Himmelstein, D. (2002). Paying for national health insurance-and not getting it. Health Affairs, 21(4), 88–98. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Universidad de AlicanteSan Vicente (Alicante)Spain

Personalised recommendations