2012

Poverty and Causality

Reprint No. 2012:30

Author(s): Tino SanandajiYear: 2012 Title: Critical Review: A Journal of Politics and Society Volume (No.): 24 (1) Pages: 51–59
Online article (restrictions may apply)


David Brady argues that low European poverty rates are a result of the welfare state. His finding relies on a relative measure of poverty, according to which the threshold for being poor differs across countries. Using the American poverty threshold as a fixed measure, though, Western Europe has a poverty rate of 18 percent, higher than that of the United States. Moreover, Brady’s thesis that welfare-state spending explains cross-country differences in inequality does not take account of the problem of reverse causality. Historically, welfare states developed in homogeneous nations that started out with higher levels of social capital and lower inequality. Scandinavia, for example, had unusually low poverty rates a century ago, and even today Americans with Scandinavian ancestry exhibit a poverty rate no higher than that in Scandinavia. Since poverty, social capital, population homogeneity, and the size of the welfare state relate in multiple ways to each other, we cannot rely on cross-country correlations to isolate the causal effect of the welfare state on poverty rates.


Reference:
Sanandaji, Tino (2012), "Poverty and Causality". Critical Review: A Journal of Politics and Society 24(1), 51–59.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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