An Economic Model of Household Income Dynamics, with an Application to Poverty Dynamics Among American Women
CEPR Discussion Paper Series No. 1830
Posted: 16 Oct 1998
Date Written: March 1998
The rise in inequality and poverty is one of the most important economic and social issues in recent times. But in contrast to the literature on individual earnings inequality, there has been little work modeling (as opposed to documenting) household income dynamics. This is largely because of the difficulties created by the fact that on top of the human capital issues that arise in personal earnings, individuals are continually forming, dissolving and reforming household units. This paper proposes a framework for modeling household income dynamics. It emphasizes the role of household formation and dissolution and labor market participation. It allows standard economic theory to address the issues of household, as distinct from individual, income and poverty dynamics. In this paper, we illustrate this framework with an application to poverty rates among young women in the United States. We use this model to analyze differences in poverty experiences, particularly between black and white women.
JEL Classification: D31, I32
Suggested Citation: Suggested Citation