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Winning the War: Poverty from the Great Society to the Great Recession

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  • 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.

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Bibliographic Info

Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 45 (2012)
Issue (Month): 2 (Fall) ()
Pages: 133-200

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Handle: RePEc:bin:bpeajo:v:45:y:2012:i:2012-02:p:133-200

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Keywords: poverty; poverty rate; income-based; consumption-based; tax policy;

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References

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  1. Robert J. Gordon, 2006. "The Boskin Commission Report: A Retrospective One Decade Later," International Productivity Monitor, Centre for the Study of Living Standards, vol. 12, pages 7-22, Spring.
  2. Christian Broda & Ephraim Leibtag & David E. Weinstein, 2009. "The Role of Prices in Measuring the Poor's Living Standards," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 77-97, Spring.
  3. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
  4. Ernst R. Berndt, 2006. "The Boskin Commission Report After a Decade: After-life or Requiem?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 12, pages 61-73, Spring.
  5. Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
  6. Atkinson, Anthony B, 1991. "Comparing Poverty Rates Internationally: Lessons from Recent Studies in Developed Countries," World Bank Economic Review, World Bank Group, vol. 5(1), pages 3-21, January.
  7. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  8. Jon Bakija, 2006. "Documentation for a Comprehensive Historical U.S. Federal and State Income Tax Calculator Program," Department of Economics Working Papers 2006-02, Department of Economics, Williams College, revised Aug 2009.
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Cited by:
  1. Christopher D. Carroll & Thomas F. Crossley & John Sabelhaus, 2013. "Introduction to "Improving the Measurement of Consumer Expenditures"," NBER Chapters, in: Improving the Measurement of Consumer Expenditures National Bureau of Economic Research, Inc.

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