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. (C) 2012 Elsevier Inc. All rights reserved.