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BPEA Article

Winning the War: Poverty from the Great Society to the Great Recession

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Abstract

We consider the long-run patterns of poverty in the United
States from the early 1960s to 2010. Our results contradict previous studies
that have argued that poverty has shown little improvement over time or that
antipoverty efforts have been ineffective. We find that moving from traditional
income-based measures of poverty to a consumption-based measure and,
crucially, adjusting for bias in price indexes lead to the conclusion that the
poverty rate declined by 26.4 percentage points between 1960 and 2010,
8.5 percentage points of which has occurred since 1980. Our consumption-based
measure suggests considerably greater improvement than the income-based
measures for single-parent families and the elderly, but relatively less
for married-parent families. Changes in tax policy explain a substantial part
of the decline in poverty; Social Security has also been important, but other
transfer programs have played a small role. Changes in education have also
contributed, but other demographic trends have had little impact. Measurement
error in income likely explains some of the most noticeable differences
between changes in income poverty and in consumption poverty, but saving
and dissaving appear to play a modest role for most demographic groups.

Authors

James X. Sullivan

Co-Founder, Lab for Economic Opportunities - University of Notre Dame

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