Long-run effects of public expenditure on poverty

Abstract

Household characteristics may have long-run effects on individual outcomes in adulthood. For instance, individuals who lived when young in households experiencing financial problems are more likely to be poor when adults. Governments try to reduce these effects and to promote equality of opportunity. The objective of this paper is to check whether public expenditure has a long-run effect in reducing the probability of being poor when adult, and to what extent. Our main finding is that public expenditure on education has a strong long-run effect on reducing incidence of poverty in adulthood. We also find that this effect is concentrated mainly among individuals who have parents with a low level of education. ; Financial support from Ministerio de Economía y Competitividad (ECO2014-57413, ECO2012-34928 and ECO2015-65820-P (MINECO/FEDER)), Generalitat Valenciana (Prometeo/2013/037), Junta de Andalucía (SEJ-4941, SEJ-5980) and Instituto Valenciano de Investigaciones Económicas (IVIE) is gratefully acknowledged.