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Events that Trigger Poverty Entries and Exits

Events that Trigger Poverty Entries and Exits. Signe-Mary McKernan Caroline Ratcliffe The Urban Institute Improving Measurement of Poverty in the Americas: Health Adjusted Poverty Lines Pan American Health Organization September 30, 2003. Introduction/Motivation.

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Events that Trigger Poverty Entries and Exits

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  1. Events that Trigger Poverty Entries and Exits Signe-Mary McKernan Caroline Ratcliffe The Urban Institute Improving Measurement of Poverty in the Americas: Health Adjusted Poverty Lines Pan American Health Organization September 30, 2003

  2. Introduction/Motivation • U.S. poverty rates fell from near record highs in 1993 to lows in 2000, and have increased in 2001 and 2002. • What events triggered entries into and exits from poverty in the U.S. during the last decade? • Understanding why individuals enter and exit poverty is necessary for effective policy, yet little is known about the events associated with poverty.

  3. Research Questions • What events increase an individual’s likelihood of entering and exiting poverty? • Focus on shifts in household structure, employment status, and disability status. • Have these events changed over time — from the late 1980s to the late 1990s? • We focus on: • U.S. poverty • Official U.S. measure of poverty • Compares family resources (annual before-tax money income) with official poverty thresholds.

  4. Prior Research: Method & Findings • Methods used to examine events • Most researchers use descriptive methods (Bane and Ellwood 1986, Ruggles and Williams 1987, Duncan and Rodgers 1988, and Blank 1997). • Descriptive methods do not disentangle the relationship between one event and a poverty transition from that of other events or demographic characteristics. • Findings • Changes in earnings and labor supply are more important than changes in household structure or composition, for general population. • Changes in household structure are important for female-headed household sub-population.

  5. This Study’s Contributions • Multivariate framework • Use two data sets • Survey of Income and Program Participation (SIPP) • Panel Study of Income Dynamics (PSID) • Monthly SIPP data • Few studies have used the SIPP. • Closely timed measures between events and changes in poverty status. • Whether events have changed over time. • Examines poverty in the post-welfare reform period.

  6. Empirical Model • Discrete-time multivariate hazard model. • Separate entry and exit equations. • Logit specification: • VectorT represents transition events. • Vector X represents control variables.

  7. Empirical Model: Issues • Lags • Events that occurred up to one year ago are allowed to affect transitions in the current period. • Left-Censoring • Included left-censored spells and a dummy variable indicating them in the model. • Endogeneity • We are not necessarily identifying causal effects.

  8. Variables • Events hypothesized to affect poverty: • the birth of a child, • a change in household headship, • a change in disability status, • a change in educational attainment, • a change in employment status, and • a change in the state of the economy. • Control variables: • age, race, gender, education level, number of children and adults, geographic characteristics, and state of the economy.

  9. Data / Sample • Survey of Income and Program Participation (SIPP) • 1988, 1990, 1996 panels. • 2 - 4 year panels of monthly, longitudinal data. • Provide data for 1988-1992, 1996-1999. • Panel Study of Income Dynamics (PSID) • 1975 - 1997 waves. • Over 20 years of annual, longitudinal data. • Sample: All individuals.

  10. Multivariate Results • Poverty Entry • 1996 SIPP panel • Comparison of 1988/90 and 1996 SIPP panels • Comparison of 1988/90 SIPP, 1996 SIPP, and PSID • Poverty Exit • Comparison of 1988/90 and 1996 SIPP panels

  11. Conclusion • There appears to be no single path into or out of poverty. • Many events are related to poverty transitions: • Employment change • Shifts in household headship • Shifts in disability status • Educational gains • Comparison of pre- and post-welfare reform periods show differences and similarities: • Employment is important in both periods. • Birth of a child and educational gains are similar. • The relationship between poverty transitions and shifts in disability status differ across the two periods in models that control for employment, but are similar in models that do not control for employment. • We see this same pattern for household headship shifts.

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