The sensitivity of poverty rates to macro-level changes in the European Union

The authors use the European Union-wide tax–benefit model,EUROMOD, to establish baseline rates of relative poverty in1998 for each of the Member States and then explore their sensitivityto (a) an increase in unemployment, (b) real income growth and(c) an increase in earnings inequality. They find that povertyrates are sensitive to such ‘macro-level’ changesbut that the size—and in some cases the direction—ofthe effect varies across countries. If such indicators are tobe used in judging the effectiveness of social policies, itis important that differences in responsiveness are fully understood.