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Long-run effects of public expenditure on poverty

Abstract

Household characteristics may have long-run effects on individual outcomes in adulthood. For instance, individuals who lived when young in households experiencing financial problems are more likely to be poor when adults. Governments try to reduce these effects and to promote equality of opportunity. The objective of this paper is to check whether public expenditure has a long-run effect in reducing the probability of being poor when adult, and to what extent. Our main finding is that public expenditure on education has a strong long-run effect on reducing incidence of poverty in adulthood. We also find that this effect is concentrated mainly among individuals who have parents with a low level of education.

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Acknowledgments

We thank Pedro Albarrán, M. Dolores Collado, Laura Crespo and Christophe Muller for helpful comments. We thank participants at Fifth ECINEQ Meeting, 2013 ASSET Meeting, XXXIII Simposio de Análisis Económico and Universitat de les Illes Balears. Marisa would like to thank CREST Paris, where part of this research was carried out, for their hospitality. Financial support from Ministerio de Economía y Competitividad (ECO2014-57413, ECO2012-34928 and ECO2015-65820-P (MINECO/FEDER)), Generalitat Valenciana (Prometeo/2013/037), Junta de Andalucía (SEJ-4941, SEJ-5980) and Instituto Valenciano de Investigaciones Econó micas (IVIE) is gratefully acknowledged.

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Correspondence to Marisa Hidalgo-Hidalgo.

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Hidalgo-Hidalgo, M., Iturbe-Ormaetxe, I. Long-run effects of public expenditure on poverty. J Econ Inequal 16, 1–22 (2018). https://doi.org/10.1007/s10888-017-9360-z

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Keywords

  • Public expenditure on education
  • Poverty rate
  • Intergenerational transmission of poverty