Poor

Front 1

Why measure poverty?

Back 1

- we care about the poor
- to determine the effectiveness of current programs
- determine where to target interventions

Front 2

What is needed to define poverty?

Back 2

1. Threshold - Use values to construct; can be budget-based; can be median-based – example of a relative measure; when it doesn’t change with the standard of living – absolute measure; geography
2. Resource Measure - consumption; cash income & transfers; assets; in kind transfers
3. Aggregate - unit of analysis such as individual, household or family; time
4. Equivalence Scale - how do the thresholds vary with size and composition

Front 3

Today's measure

Back 3

4 person family = 3 x $ economy food plan

Hint 3

resource measure - annual cash income
aggregation - family
equivalence scale - today

Front 4

Problems with current poverty measure?

Back 4

- We spend a much smaller fraction of income on food - 16 to 17 percent
- doesn't vary geographically
- doesn't take into account near-poverty, depth of poverty
- doesn’t reflect increases in productivity or living standards
- resources - no entitlements, welfare
- only annual - bad because people enter and exit poverty within a year
- undercounts other income
- does not count assets
- people don't report gov't benefits
- what constitutes a family?

Front 5

GWB proposal?

Back 5

Threshold: based on a percentile of consumption in 3 categories plus a bit extra (15-25%)

Hint 5

categories:
food, shelter, clothing

Front 6

GWB resource measures?

Back 6

Resource measure: cash income + near cash in-kind transfers - (Taxes + Work expenses + Childcare expenses – if all adults working + Child support paid + Out-of-pocket medical expenses)

Hint 6

Wouldn’t move 1-1 with median income, but would rise with standard of living

Suggested elasticity : .6-.8

Front 7

Relative measure problems?

Back 7

- Only tagged to median

- Not countercyclical with business cycle.

Front 8

Why is it difficult to implement new measure of poverty?

Back 8

- highly political
- tied to so many programs

Front 9

Other measures of poverty?

Back 9

- Consumption-based
- Anchoring: constructing thresholds so that they are matched the official measure in 1980.

Front 10

Why has consumption poverty fell much faster than official poverty?

Back 10

Possible explanations:
- Measurement error – particularly with government support;
-- Differences in dissavings behavior – maybe people are spending out of their assets.
- US poor work more, but make less.