Corruption, Fatigued Democracy and Bad Governance: Are They Co-Determinants of Poverty Risk and Social Exclusion in Europe? A Cross-Country Macro-Level Comparison

Abstract

Using a macro panel of 31 European countries, this paper explores the hypothesis that cross-country differences in the exposition to the risk of poverty or social exclusion (as defined by the Europe 2020 anti-poverty strategy) are strongly affected by countries’ political, institutional and legal characteristics and particularly by the level of perceived corruption in the public and political sectors. As expected, the results show that economic growth, income distribution, public expenditure and investment, as well as education but not technical development, have strong effects on poverty reduction. This notwithstanding, results indicate that corruption and poor institutional quality significantly interact with economic co-factors and threaten the positive effects of growth on poverty. Altogether, the results signal the need for reassessment of the Euro 2020 strategy, which mainly relies on economic instruments alone.