BPEA | 1993 No. 2

Poverty, Income Distribution, and Growth: Are They Still Connected?

David Card and
David Card Princeton University
Rebecca M. Blank
Rebecca M. Blank Chancellor - University of Wisconsin-Madison, Former Brookings Expert

1993, No. 2

MACROECONOMIC GROWTH has long been viewed as one of the most effective
ways to reduce poverty. Historically, the rising tide of labor market
opportunities that accompanies an economic expansion has helped
the poor more than the rich, leading to a narrowing of the income distribution
and a fall in poverty.’ Using data from the 1950s through the
1970s, for example, Rebecca M. Blank and Alan S. Blinder estimate that
a one percentage point reduction in unemployment lowers the poverty
rate by one point.2 Economic growth in the 1980s, however, seems to
have had far weaker redistributive effects.3 The economic expansion
from 1983 to 1989 led to a more than four percentage point decline in unemployment,
but only a modest decline in aggregate poverty. Furthermore,
family income inequality increased steadily throughout the decade.