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http://ssrn.com/abstract=1535524
 
 

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Five Decades of Consumption and Income Poverty


Bruce D. Meyer


University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; National Bureau of Economic Research (NBER)

James X. Sullivan


University of Notre Dame - Department of Economics and Econometrics

August 7, 2009

MFI Working Paper No. 2010-003

Abstract:     
This paper examines poverty in the United States from 1960 through 2005. We investigate how poverty rates and poverty gaps have changed over time, explore how these trends differ across family types, contrast these trends for several different income and consumption measures of poverty, and consider explanations for the differences in trends. We document sharp differences, particularly in recent years, between different income poverty measures, and between income and consumption poverty rates and gaps. Moving from the official pre-tax money income measure to a disposable income measure that incorporates taxes and transfers has a substantial effect on poverty rate changes over the past two decades. Furthermore, consumption poverty rates often indicate large declines, even in recent years when income poverty rates have risen. We show that bias in the CPI-U has a sizable effect on changes in poverty. Between the early 1960s and 2005, an income poverty measure that corrects for bias in this price index declines by 14 percentage points more than a comparable measure based on the CPI-U. The patterns are very different across family types, with consumption poverty falling much faster than income poverty since 1980 for the elderly, but more slowly for married couples with children. Income and consumption measures of deep poverty and poverty gaps have generally moved sharply in opposite directions in the last two decades with income deep poverty and poverty gaps rising, but consumption deep poverty and poverty gaps falling. While relative poverty rose in the early 1980s, changes in relative poverty have been fairly small since 1990. We examine the role that demographics, taxes, and transfers play in explaining changes in poverty over the past three decades. We also consider whether measurement error, saving and dis-saving, and other explanations can account for income and consumption differences.

Number of Pages in PDF File: 79

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Date posted: January 13, 2010  

Suggested Citation

Meyer, Bruce D. and Sullivan, James X., Five Decades of Consumption and Income Poverty (August 7, 2009). MFI Working Paper No. 2010-003. Available at SSRN: http://ssrn.com/abstract=1535524 or http://dx.doi.org/10.2139/ssrn.1535524

Contact Information

Bruce D. Meyer (Contact Author)
University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )
1155 East 60th Street
Chicago, IL 60637
United States
(773) 702-2712 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
James X. Sullivan
University of Notre Dame - Department of Economics and Econometrics ( email )
Notre Dame, IN 46556
United States
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References:  79
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