Poverty, material deprivation and social exclusion across regions within the European Union – the role of local economic resources

This report examines poverty, material deprivation, and poverty or social exclusion and their drivers within regions of the European Union. A key driver, local GDP per capita, seems to move very similarly within countries, suggesting their potential stochastic trends need to be controlled for. Other plausible candidate drivers of the standard of living of the least well-off include employment rates and education levels. The main result of the regional analyses is that, once local area fixed effects are controlled for, variations in drivers that have previously been identified as being associated with poverty and social exclusion, such as local labour market conditions and education levels, have little association with the outcomes. Variation in time-invariant factors, captured by the fixed effects, and country-level association, captured by country fixed effects and time trends, account for the bulk of also regional economic and social well-being. On examining the standard of living among the least well-off, local economic resources appear less important than national developments, with the notable exception of local GDP per capita.