Essays on economic insecurity

  1. Romaguera de la Cruz, Marina
Supervised by:
  1. Olga Cantó Sánchez Director
  2. Carmelo Andrés García Pérez Co-director

Defence university: Universidad de Alcalá

Fecha de defensa: 24 September 2020

Committee:
  1. Brian Nolan Chair
  2. Elena Bárcena Martín Secretary
  3. Gastón Yalonetzky Committee member
Department:
  1. Economía

Type: Thesis

Teseo: 152907 DIALNET lock_openTESEO editor

Abstract

Economic insecurity has clearly a relevant impact on individual well-being and quality of life, even if it is only in recent years that social and economic researchers have started to pay attention to this important dimension. Economic insecurity can be understood asthe stress that people experience when anticipating future economic distress. Both the reference to future periods as well as the psychological element that insecurity includes pose major difficulties when aiming to measure it, which is clearly a major drawback. Nonetheless, in the wake of the Great Recession a significant number of academics have recognised its importance in determining individual well-being and its potential effects on real economic variables and have proposed a variety of ways to assess its dimension and relevance in the social and economic functioning. Unfortunately, we are still at the starting point of many of these analyses and, consequently, still far from reaching a consensus on how it is best to measure economic insecurity and thus soundly interpret the results obtained. The present dissertation hopes to contribute to this key debate in the assessment of economic insecurity through four relevant research studies that add to the measurement and empirical analysis of this phenomenon in Europe. More specifically, this thesis aims to construct a comprehensive methodology which allows to measure economic insecurity in Europe, drawing on a variety of dimensions and indicators that can be easily obtained from the information present in the European Union Statistics on Income and Living Conditions database (hereafter, EU-SILC). This data source is harmonised for more than 30 countries in Europe and produced on a regular basis, which is a major advantage to provide sound empirical analyses of insecurity over time. In Chapter 2 we conduct a systematic review of current existing measures of economic insecurity and we conclude that surveys on subjective expectations are the best tool to approximate this phenomenon. However, these surveys are not widespread and multidimensional insecurity indices combining subjective and objective dimensions based on living conditions surveys arise as a valuable alternative. In this chapter we contribute to the literature by analysing four different methods to aggregate and weigh dimensions when computing a synthetic indicator of economic insecurity using data from the most popular living conditions survey in Europe (EU-SILC) for Spain. We find that the evolution and distribution of economic insecurity are robust to the aggregation technique used, even if insecurity levels are different. We believe that a counting approach has the greatest advantages, as this method provides a straightforward economic interpretation and produces a more accurate measurement of insecurity levels in middleclasses in comparison with other procedures which give more relevance to extreme situations. Therefore, in Chapter 3 we deepen the analysis of the role of a variety of insecurity dimensions and we combine six different unidimensional indicators in a single index based on a counting approach strategy that proxies the subjective and objective determinants of the phenomenon, which allows us to identify its incidence and intensity separately. We then undertake an empirical illustration of this methodology in three European countries, finding that economic insecurity prevalence decreases as household disposable income grows. Furthermore, in Spain and France a significant proportion of insecure individuals are present in middle-income households while that is not the case in Sweden. In Chapter 4 we extend our comparative analysis to the European context, clustering countries into five groups which aim to capture diverse welfare state regimes. Using the multidimensional economic insecurity index proposed in previous chapters, we find that Mediterranean and Eastern European countries show the largest levels of economic insecurity whereas social-democratic countries are the most secure. However, insecurity affects the population in the middle classes only in some countries but not in others. The contribution of dimensions to overall insecurity also differs by country group: the role of objective versus subjective dimensions is larger in post-transition Eastern European regimes than in long-standing capitalist countries and the level of insecurity in liberal regimes is more linked to large income losses than elsewhere. Furthermore, we conclude that the young, the less educated and the unemployed living in households with dependent children are the subpopulations that are most vulnerable to economic insecurity in all Europe. Finally, in Chapter 5 we test if tax-benefit policies are helpful in reducing economic insecurity by acting as a public safety net in case economic risks materialise in a near future. We consider the impact of individuals’ characteristics and macroeconomic variables on economic insecurity simultaneously by using multilevel modelling techniques. We confirm that the individual determinants of insecurity we found in the previous chapter are relevant, but we also discover a significant role of country-wide variables. More generous social protection expenditure and larger personal tax revenue contributes to reduce economic insecurity, especially those social protection functions related to specific economic hazards. Moreover, the tax-benefit system shows an additional effect on the insecurity of households with dependent children beyond its general impact on insecurity for the population as a whole.