Poor Targeting? Targeting the Poor? Redistribution in the Hungarian Welfare System by Age and Socio-Economic Status

Abstract

In line with previous research, we confirm that welfare programs in Hungary are poorly targeted in terms of socio-economic status (SES). However, by adding age to our models, we demonstrate that even if the status is irrelevant in explaining access to social benefits and services, age is not. Applying simple regression techniques, we compare both the theoretical importance (based on regression coefficients) and the dispersion importance (using Shapley-value decomposition of the R2) of age and SES in explaining the receipt of and contributions to both in-kind and in-cash benefits at the level of the general government in Hungary. We conclude that what appears to be a dysfunctional instrument in alleviating poverty and inequality in a univariate model is actually a channel of resource reallocation that connects working-age people to children and to the elderly when the model includes two predictors.

Keywords: targeting of welfare benefits; Matthew effect; intergenerational transfers; poverty; inequality; welfare state