Bavaro, Carranza and Nolan documented, for 30 European countries using retrospective data from the 2019 EU-SILC intergenerational module, that the strength of intergenerational poverty persistence varies widely across countries, is higher where current or parental poverty is more widespread (a poverty analogue of the Great Gatsby Curve), is lower where cumulative social-protection spending is higher, and is partly mediated by own education and own occupation, with the relative weight of these two mediators varying greatly across countries. The unresolved problem is to move from this descriptive mapping to causal and measurement-validated understanding: which policy institutions, labor-market structures, and redistributive transfers causally generate the cross-country variation and its covariation with poverty rates; why education and occupation mediate the transmission to different degrees across welfare regimes, and whether the mechanisms are distinctive to poverty rather than general socio-economic transmission; and whether the retrospective basic-needs and financial-hardship measures of parental poverty are valid. Subsequent literature has illuminated adjacent pieces — a five-country decomposition attributing high US persistence to weak tax-and-transfer insurance, multilevel associations between welfare generosity and transmission in Europe, and US structural-policy modeling — but no work identifies the causal institutional drivers of the European cross-country pattern or validates the retrospective measures, so the core remains open.

Background

Whether poverty is transmitted from parents to children, and how strongly, is a central question in the economics and sociology of inequality. The reference point is the Great Gatsby Curve, the cross-country observation that nations with higher income inequality tend to show stronger associations between parents' and children's economic positions, i.e. lower intergenerational mobility (Corak 2013). Whether this association is causal, and which institutions underlie it, remains contested; a major review (Durlauf, Kourtellos and Tan 2022) emphasizes that the curve's interpretation is sensitive to how mobility and inequality are measured and to identification problems that country-level comparisons cannot by themselves solve. Bavaro, Carranza and Nolan (2023, published 2024) posed the analogous question for poverty itself rather than income in general. They exploited the 2019 ad hoc module of EU-SILC (the European Union's household survey 'Statistics on Income and Living Conditions'), in which respondents aged 25 to 59 in 30 European countries retrospectively reported the circumstances of their parental household when they were about 14 years old. The module contains no parental income, so they constructed proxy measures of parental poverty: a 'narrow' measure requiring that the household both could not meet basic needs and experienced financial hardship (based on retrospective reports of lacking items such as school books, a daily meal with meat or fish, or a week's annual holiday for financial reasons, together with the household's reported overall financial situation), and a 'broad' measure combining one of those with low parental education or working-class parental occupation. Current adult poverty was measured with the EU's standard social-inclusion indicators: AROP (equivalised disposable household income below 60% of the national median, i.e. 'at risk of poverty') and AROPE ('at risk of poverty or social exclusion', which adds severe material and social deprivation and very low household work intensity). Logistic regressions of current on parental poverty, summarized by odds ratios and average marginal effects (the predicted change in poverty probability associated with parental poverty), showed wide cross-country variation in persistence that did not follow the standard welfare-regime groupings (the familiar typology classifying welfare states, for example, as Nordic, Continental-European or Anglo-liberal) cleanly. Persistence was stronger where current or parental poverty rates were higher — a poverty analogue of the Great Gatsby Curve (the correlation between a country's marginal effect and its current poverty rate was 0.58 with the narrow and 0.68 with the broad measures) — and weaker where average social-protection spending as a share of GDP since 1980 was higher. Mediation analysis, i.e. re-estimating the models with the respondent's own educational attainment and occupational class added, showed that these two factors jointly account for roughly two-thirds of the pooled association, but their relative weight differed greatly across countries (for example, occupation mattered more than education in Finland, the Netherlands and Norway). The authors were explicit that this exercise is descriptive: the retrospective parental-poverty items have never been validated, item missingness (about 9% for the narrow and 15% for the broad measure, driven by parental occupation questions) may affect estimates, conclusions shift with the narrow-versus-broad construction, and the mechanisms — whether redistributive transfers, education systems, or labor-market structures generate the pattern — remain unidentified. Related work clarifies what is at stake: Parolin, Pintro-Schmitt, Esping-Andersen and Fallesen decompose intergenerational poverty persistence in five high-income countries and attribute the high US value to weak tax-and-transfer insurance and a residual poverty penalty; Dewilde links welfare-spending generosity to weaker transmission of financial disadvantage across Europe in multilevel models; Krueger, Ludwig and Popova study education-policy counterfactuals for the persistence of poverty in a calibrated US model; and Mayoral, Ray and Genicot show that conclusions about the Great Gatsby Curve itself depend critically on whether mobility is measured as persistence or as growth progressivity. What no existing study provides is a causal, institution-level account of the European cross-country pattern together with validated measurement of the retrospective proxies on which it rests.

Problem Statement

The problem is the one Bavaro, Carranza and Nolan pose for future work on their 30-country European results. (1) Causal drivers: identify which institutions, policies, labor-market structures and redistributive transfers causally account for (i) the wide cross-country variation in the strength of intergenerational poverty persistence in Europe and (ii) its positive association with current and parental poverty rates — the 'poverty Great Gatsby curve' — and establish whether these mechanisms are distinctive to poverty as against the broader intergenerational transmission of advantage and disadvantage. (2) Mediation heterogeneity: explain why own education and own occupational class carry very different mediating weights in different countries and welfare regimes. (3) Measurement foundations: validate the retrospective parental-poverty measures (reported inability to meet basic needs and financial hardship around age 14) against independent criteria, and establish the robustness of the substantive conclusions to alternative parental-poverty constructions, thresholds, item combinations and missing-data handling. It must identify, rather than merely correlate, the institutional drivers of both the cross-country variation in persistence and its covariation with current and parental poverty rates, must establish whether these mechanisms are distinctive to poverty rather than general socio-economic transmission, must explain why own education and own occupational class carry very different mediating weights in different countries and welfare regimes, and must validate the retrospective parental-poverty measures against independent criteria and establish the robustness of the substantive conclusions to alternative parental-poverty constructions, thresholds, item combinations and missing-data handling.

References

  1. Michele Bavaro, Rafael Carranza, Brian Nolan (2023). Intergenerational Poverty Persistence in Europe – Is There a 'Great Gatsby Curve' for Poverty? SocArXiv preprint, Stone Center on Socio-Economic Inequality Working Paper 79. DOI: 10.31235/osf.io/phrq2. URL: https://doi.org/10.31235/osf.io/phrq2
  2. Michele Bavaro, Rafael Carranza, Brian Nolan (2024). Intergenerational poverty persistence in Europe – Is there a 'Great Gatsby Curve' for poverty? Research in Social Stratification and Mobility 94, 100991. DOI: 10.1016/j.rssm.2024.100991. URL: https://doi.org/10.1016/j.rssm.2024.100991
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