Poverty in the Regions of the European Union – Measurement with a Composite Indicator

Abstract

We measure area-specific human poverty in the European Union (EU) at the second level of the nomenclature of territorial units for statistics (NUTS 2). We construct a regional human poverty index (RHPI), which comprises four dimensions: social exclusion, knowledge, a decent standard of living, and a long and healthy life. The RHPI provides information regarding the relative standing of a given country with respect to its level of poverty and shows the variability of poverty within a country with respect to NUTS 2. The RHPI shows satisfactory statistical coherence, confirmed by the results of correlation analysis and a principal component analysis. As confirmed by an uncertainty analysis, the RHPI also shows satisfactory robustness to the normative assumptions made during the construction process.

The RHPI is computed for all NUTS 2 regions in 28 EU countries. Our results show that the poverty scale differs considerably among EU countries, with RHPI scores ranging between 9.23 for Prague and more than 65 for Bulgarian Yugoiztochen and Severozapaden. We also find that substantial differences in levels of poverty between regions are present in all EU countries. The only exceptions to this finding are small EU countries where neither NUTS 1 nor NUTS 2 regions exist.

Keywords: composite indicator, European Union, NUTS, poverty, uncertainty analysis

JEL Classification: I32