Poverty dynamics and disability: An empirical exercise using the European community household panel

In this article, we analyze the influence of being disabled on poverty dynamics. We present results adjusting the modified OECD equivalence scale by the number of adults with severe disabilities in the household and calculate poverty rates with this disability-adjusted scale. In addition we address the problem of incidental parameters in econometric models for the probability of being poor and separate the effects of being disabled on poverty that are short and long-term. The results show that the long-term (‘persistence’) effect is three times the short-term (‘true state dependence’) effect, which has significant social policy implications.

► The aggregate poverty rate does not significantly change adjusting for disability.
► However, the poverty rate for households with people with disabilities increases 17–24 points.
► The impact of disability on the likelihood of being poor is different in the short and the long-term.
► The long-term impact is around 3 times the short-term impact.