Mechanisms of poverty alleviation: anti-poverty effects of non-means-tested and means-tested benefits in five welfare states

Abstract

Substantial cross-national differences in poverty alleviation are well documented. But the extent to which different parts of the social transfer system account for this variation is still relatively unexamined. This paper analyses the redistributive effects of specific social policy institutions in a comparative perspective. The main question is to what extent non-means-tested entitlements and means-tested benefits reduce relative economic poverty in different institutional settings. It is shown that the structure of non-means-tested benefits is more important than that of meanstested benefits in explaining differences in poverty alleviation across countries. The paper also presents a new method for estimating the anti-poverty effects of separate parts of the social transfer system. This method decomposes the anti-poverty effects of a set of social transfers into independent and combined effects, which produces more valid results than prevalent methods used to assess the impact of a particular transfer on poverty. The countries included in this study are Canada, Germany, Sweden, the United Kingdom and the United States. The empirical analyses are based on data from the Social Citizenship Indicators Programme (SCIP) and Luxembourg Income Study (LIS) describing the situation in the mid-1990s.