Abstract
This study uses the Current Population Survey and a decomposition method proposed by Datt and Ravallion to assess the impacts of income growth and income distribution on poverty across states in the United States. It finds that between 1992 and 2011 growth of income, rather than changes in income distribution, was the major source of poverty reduction across US states. The empirical analysis also shows that there is asymmetrical impact on poverty — via both income distribution and income growth — during recessions and economic expansions: poor people are hit harder during recessions and benefit less during economic booms.
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Notes
The impact of the recession on the poor is technically difficult to measure because social, economic, and demographic factors are jointly involved. However, the proportion of working families below 200 percent of the poverty threshold increased sharply in 2008 and again in 2009, as many middle-class families fell into the low-income trap [Roberts et al. 2011].
For example, the 2008–2010 3-year average poverty rate of New Hampshire was 7.1 percent whereas that of Mississippi was 21.3 percent.
An analysis at the state level implies that within each state the economy is homogenous and, thus, that each state supposedly has its own steady state. This working assumption is somewhat controversial, but working with states is convenient for several reasons, including availability of good data. Moreover, states have a great deal of flexibility in terms of choosing their own policies (education, fiscal, safety, legal etc.), which would affect their long-run path of economic growth. For a discussion about states’ homogeneity, see Sedgley and Elmslie [2004].
The CPS is a nationwide survey of about 60,000 households conducted monthly for the US Bureau of Labor Statistics by the US Census Bureau. The survey is representative of the civilian non-institutionalized population of the United States with sample located in more than 2,000 counties and independent cities and coverage in every state and in the District of Columbia.
See Kraay [2006] for details about this decomposition. Our notation is slightly different from Kraay [2006]. More precisely, in our study, μ denotes the annual growth in average income instead of average income as in Kraay [2006].
The exports data utilized in this study are calculated from the Origin of Movement series (rather than Exporter Location) compiled by the Foreign Trade Division of the US Census Bureau.
All variables included in the regression analysis are measured in decimals. For instance, proportion of the population with higher education is coded 0.25, which implies that 25 percent of the population has at least a college degree.
This approach is consistent with several studies including Gittell and Tebaldi [2010] and Forbes [2000].
The authors will be happy to provide the RE results and Hausman test statistics upon request.
Because weights must be constant within states over time, we use the 1992 population as weights.
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We thank anonymous referees for their thoughtful suggestions to revise and improve this paper.
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Tebaldi, E., Kim, J. Is Income Growth in the United States Pro-Poor? A State-Level Analysis. Eastern Econ J 41, 251–272 (2015). https://doi.org/10.1057/eej.2014.14
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DOI: https://doi.org/10.1057/eej.2014.14