Government effectiveness, middle class and poverty dynamics in the EU: a multilevel analysis

Bruno, Bosco; Ambra, Poggi (2016). 'Government effectiveness, middle class and poverty dynamics in the EU: a multilevel analysis' Paper presented at the annual conference of the HDCA, Tokyo 2016.


abstract
Good political practices and institutions may create the conditions to reduce poverty and social exclusion enhancing people's capabilities. Our study analyzes how the quality of government (e.g. the quality of public services, the quality of policy formulation and implementation) and the size of the middle class shapes individual poverty and social exclusion dynamics.
Using the 2009-2011 EU-Statistics on Income and Living Conditions data, we conduct a multi-level analysis of poverty and social exclusion across 26 EU countries. To shed light on the determinant of the risk of poverty and social exclusion, we focus on the following two indicators.
First, we focus on the measure of government effectivenessreleased by the Word Bank testing whether the risk of poverty and social exclusion at individual level is lower in the presence of governments that are more effective. In this context, government effectiveness reflects the perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies.
Second, we focus on the size of the middle class. According with the Aristotle’s observation that the middle class benefits from good government, and thus demands it and helps sustain it by financing public goods through willing payment of taxes (Birdsall, 2010; Alesina, Cozzi, and Mantovan, 2012; Loayaza et al., 2012), we test whether a larger middle class is associated with a lower risk of poverty.  To the middle class is generally attributed “not only a moderating role vis-à-vis political extremists, but also an interest in political democratization, in good and transparent governance, and respect of civil rights” (Birdsall, 2015). Therefore, the middle class wants a government that maintains a level playing field in the economic arena, free of insider rents and privileges, capable of regulating effectively natural monopolies, and able to administer and enforce tax systems adequate to provide security, basic infrastructure, and other public and collective goods and services (Birdsall, 2010).
Our results shows that the risk of poverty and social exclusion at individual level is shaped by both individual characteristics, the quality of government and the size of the middle class characterizing the country where the individual resides. Both the measure of government effectiveness and the size of the middle class are negatively correlated with the risk of poverty and social exclusion.

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