into poverty and below the level that makes it affluent.<sup>3</sup> Using data from four-year panels of the EU Statistics on Income and Living Conditions (EU-SILC), an annual harmonized income and living standards survey conducted in EU countries, we can observe transitions into and outside poverty and thus specify a low probability of falling into poverty. Clearly, the vulnerability to falling into poverty is negatively correlated with the lifetime or permanent income. This, in turn, is a function of household and individual assets and characteristics. Focusing on income generation characteristics, such as the assets and skills of household members, we link vulnerability to poverty to permanent income rather than to the more transient ups and downs of annual income flows.

# **_Data_**

The EU-SILC survey is based on a rotating panel that allows for cross-sectional and longitudinal estimations for most EU and three other countries—Iceland, Norway, and Switzerland. Our analysis focuses on the European Union (excluding Germany<sup>4</sup> ), Iceland, and Norway<sup>5</sup> (Table 1). Panels in two- to four-year increments are defined from 2005 through 2021. We use the four-year panels corresponding to reference years 2005–08 (just before the global financial crisis) and 2015–18 (the post–global financial crisis period).<sup>6</sup> We exclude the panels that span the COVID-19 pandemic (2020 and 2021).<sup>7</sup> The choice of the two periods—the first characterized by inclusive growth throughout Europe, the second characterized by recovery but still plagued, in many cases, by scarring from the global financial crisis—was motivated by our desire to assess changes in vulnerability.

income). We therefore use the high-income poverty lines of $24.35 per day. Note that this poverty line is the poverty line for high-income countries and that that all countries in the European Union except Bulgaria (an upper-middleincome country) are high-income countries. Another option would have been to use the upper-middle-income line for upper-middle-income countries. But as this value ($6.85) is substantially lower than the high-income line ($24.35), we use the same line for all countries. For a discussion of how the poverty line for high-income countries was established, see Joliffe and others (2022).

3 For symmetry with the lower threshold, we define the upper threshold also in terms of probability of falling into poverty – but at an even lower level (of 1 percent). Alternative definitions can be to use the income that puts a household in a certain top percentile of the income distribution. We discuss these alternative definitions in section 4 and table A.4.

4 Eurostat requires permission from each participating country to access microdata. Unfortunately, Germany does not authorize the access to microdata pertaining to that country for researchers that are based in non-EU institutions.

5 Switzerland is excluded because some years of data were not available.

6 The analysis excludes Croatia and Romania, because data for these countries are not available for the 2005-08 period.

7 As of 2024, there is not yet a 4-year panel that completely excludes the pandemic shock of 2020 and 2021.

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