By Koen Vleminckx, Timothy M. Smeeding
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Extra resources for Child Well-Being, Child Poverty and Child Policy in Modern Nations
An interpretation that is consistent with our data (but by no means the only one) is that the high degree of means-testing and the relative absence of universal and work-related transfers in the English-speaking countries, and the opposite in many European countries, may account for part of this pattern. Increased means-testing appears to be an attractive solution to the fiscal problems in many countries. If our findings are due to the different principles underlying transfer schemes, increased means-testing may ultimately prove to be less desirable for poor children.
For the poorest one fifth of children in each country, we calculate the elements of the identity Average disposable income = Average market income + Average net social transfers where all incomes are measured in equivalent PPP-adjusted constant US dollars10. 4 for each of the 23 countries with recent LIS data (excluding Austria, where we cannot separately identify market incomes). The five transition countries have been separately identified with open diamonds11. Since market income and net social transfers are defined to add up to disposable income, the latter can also be read directly from this figure.
This high level of transfers is consistent with low total social expenditure on income transfers, because social transfers in the English-speaking countries are more closely targeted on the most disadvantaged. It has been argued by many (eg, Korpi and Palme, 1998) that targeting can be counter-productive for the poor, as it may erode middle-class political support for the welfare state and hence reduce the total funds available for transfers. The higher level of poverty in the English-speaking countries could be seen as providing some support for this proposition.