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Poverty, Government Transfers, and the Business Cycle: Evidence for the United States

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  • Dierk Herzer

    () (Ibero-Amerika Institut der Universität Göttingen, Johann Wolfgang Goethe-Universität, Frankfurt/M.)

  • Rainer Klump

    (Johann Wolfgang Goethe-Universität Frankfurt/Main)

Abstract

We examine the impact of government transfers and the business cycle on poverty in the United States in the context of a poverty function that includes the official poverty rate, three types of government transfers, real wages, the number of female-headed families, and a business cycle variable. Using cointegration techniques, we find ─ contrary to most previous studies ─ that government transfer programs play an important poverty-reducing role. In addition, the findings suggest that the business cycle is one of the key variables in explaining poverty in the US. Furthermore, the empirical results show that the size and composition of public transfer payments change over the business cycle. We also find poverty to have a significant effect on government transfers, the business cycle, and the structure of households.

Suggested Citation

  • Dierk Herzer & Rainer Klump, 2006. "Poverty, Government Transfers, and the Business Cycle: Evidence for the United States," Ibero America Institute for Econ. Research (IAI) Discussion Papers 141, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:141
    as

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    References listed on IDEAS

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    More about this item

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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