Working Paper: NBER ID: w18718
Authors: Bruce D. Meyer; James X. Sullivan
Abstract: This paper considers the long-run patterns of poverty in the United States from the early 1960s to 2010. Our results contradict previous studies that have argued that poverty has shown little improvement over time or that anti-poverty efforts have been ineffective. We find that moving from traditional income-based measures of poverty to a consumption-based measure (which we argue is superior on both theoretical and practical grounds) and, crucially, adjusting for bias in price indices leads to the conclusion that the poverty rate declined by 26.4 percentage points between 1960 and 2010, with 8.5 percentage points of that decline occurring since 1980. Consumption poverty suggests considerably greater improvement than income poverty for single parent families and the aged, but relatively less improvement for married parent families. Our analyses of the proximate causes of these patterns indicate that changes in tax policy explain a substantial part of the decline in poverty and that social security has been important, but that the roles of other transfer programs have been small. Changes in education have contributed to the decline, while other demographic trends have played a small role. Measurement error in income is likely to explain some of the most noticeable differences between changes in income and consumption poverty, but saving and dissaving do not appear to play a large role for most demographic groups.
Keywords: Poverty; Consumption; Income; Tax Policy; Social Security
JEL Codes: D12; I32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CPI bias adjustment (C43) | decline in consumption poverty rate (I32) |
| tax policy changes (H29) | decline in consumption poverty rate (I32) |
| social security benefits (H55) | reduction in poverty (I32) |
| changes in education levels (I24) | decline in poverty (I32) |
| measurement error in income reporting (C83) | discrepancies between income and consumption poverty measures (I32) |
| demographic trends (J11) | minor role in poverty changes (I32) |