Poverty and material deprivation dynamics in Italy

Assessing the impact of social policies on income poverty and material deprivation dynamics is crucial in order to develop effective policy responses. Yet, this kind of analysis has seldom been attempted with longitudinal data. This manuscript begins to fill this gap, and investigates the micro and macro determinants of year to year income poverty and material deprivation transitions in Italy over the period 2004-2015, focusing on the impact of social benefits received at the individual level and of average per capita expenditures for social services by Municipalities at the aggregate level. We define year to year transitions as dichotomous variables, and estimate probit models on pooled data from 9 longitudinal components of IT-SILC (complemented with data on macro-structural factors, from ISTAT source). This allows us to analyze complex interdependencies between different covariates influencing poverty and deprivation in a dynamic context over eleven years characterized by different economic cycles. A set of novel results emerges. Among others, regarding the role of social policies: i) expenditures in social services speed poverty exits and prevent deprivation entries; ii) social benefits at the individual level increase the probability of poverty exits and reduce the probability of poverty entry for unemployed and inactive individuals. Also, the strong regional inequality characterizing the Italian North-South divide manifests itself not only in terms of aggregate incidence of (relative) income poverty and (absolute) material deprivation, but also in terms of the individual chances of transitions.