Climbing out of poverty, falling back in : Low incomes’ stability in Spain

Abstract

The study of the probability of entering or escaping a low income spell is not sufficient to fully describe a household's experience in deprivation. If poverty spells are recurrent in time, the persistency of poverty for a given household is not completely described unless the household's likelihood of a fall back into deprivation shortly after exit is considered. It is found that by combining the re-entry equation results with those of the exit equation, one can discuss, in a comprehensive way, which household characteristics promote welfare stability or instability and poverty persistence or transience. Results indicate that one-third of households who manage to leave poverty in Spain return to it shortly after exit. This upward income mobility, if maintained for a year, appears to enable a state of non-poverty for a lengthy period. Better-educated households and households with a spouse are more stable in their income level. Also, the point reached in the income distribution after a jump out of poverty is more a determinant for reducing the household's re-entry probability than is the duration out of poverty.