The effects of social transfers on the At-Risk-Of-Poverty rate - A local comparison with two applications of the Fay-Herriot model

The paper shows how the joint use of sample surveys - such as the Survey on Income and Living Conditions (EU-SILC) - Census data, Tax declarations and indices of social capital, can be useful to estimate poverty at the provincial level, within a FayHerriot framework of analysis. I show that transfers have a huge impact in addressing the issue of poverty, but - as stated by Okun - they may create market distortions. I review survey methodologies for data employed within the models. Four FayHerriot analyses are implemented, to show how social transfers affect poverty and how regional poverty lines give rise to not-inflated results. I discuss the robustness of results through an analysis of the distribution of residuals and the area effects by implementing a statistical test. In the end, both statistical and political conclusions are drawn. The appendix shows why a good survey design is crucial when dealing with Paretian variables, such as income