Addressing Child Poverty in the EU: The Role of Child-Contingent Payments in 2011-2024

Child poverty remains a persistent challenge across the European Union: approximately 20 million children are at risk of poverty or social exclusion, and the economic costs of child poverty are estimated at an average of 3.5% of GDP annually in Europe (Clarke et al., 2024). Child-Contingent Payments (CCP), comprising cash transfers and tax reliefs linked to the presence of children in the household, constitute a primary policy instrument for addressing this issue. The period 2011-2024 encompasses significant economic and policy shifts: post-Great Recession austerity, the COVID-19 pandemic, subsequent inflation shocks, and the launch of the European Child Guarantee in 2021. Understanding how CCP have evolved and contributed to child poverty reduction during this turbulent period is crucial for evidence-based policymaking.

This paper provides a comprehensive analysis of the level, composition, distribution, and poverty/inequality impacts of CCP across all 27 EU Member States from 2011 to 2024. We extend previous research (Figari et al., 2011; Ferrarini et al., 2013) by covering a longer and more recent period, offering novel decompositions by payment type and targeting mechanism, and quantifying both poverty and inequality impacts with high granularity.

We use EUROMOD, the EU tax-benefit microsimulation model, combined with EU-SILC microdata. CCP are decomposed into child benefits, other benefit supplements for children, and child tax reliefs. We measure poverty using the at-risk-of-poverty (AROP) rate and gap, and inequality using the Gini coefficient. We rely on the Shapley decomposition to address sequential bias when assessing individual CCP components.

CCP reduce child poverty by 10.6 percentage points on average across the EU (from 26.5% to 15.9%) and decrease the Gini coefficient by 5.7%. However, we document substantial cross-country heterogeneity. Poland’s Family 500+ program, introduced in 2016, tripled the country’s CCP effectiveness, i.e. poverty reduction impact improved from 5.4% to 16.7% between 2011 and 2024. Slovakia achieved the largest inequality reduction (15.3% Gini decrease) alongside a 106% increase in benefit levels. In contrast, Spain’s CCP achieved only a 3.9% poverty reduction, reflecting persistent coverage gaps. We identify targeting and adequacy shortfalls: only 37% of CCP expenditure reaches poor households, and only 51% of payments to poor families are adequate to lift them above the poverty line. Countries with stronger targeting (Ireland, Romania) do not necessarily achieve higher adequacy, suggesting that benefit generosity matters as much as targeting design.

Policy design choices, such as universal versus targeted benefits, or cash transfers versus tax reliefs,significantly determine CCP effectiveness in reducing child poverty and inequality. Our findings provide timely evidence for the implementation of the European Child Guarantee and national reform efforts, highlighting that both adequate benefit levels and appropriate targeting mechanisms are necessary for meaningful poverty reduction.