The economics of poverty intensity : a cyclical analysis in a generational framework /

Abstract

This dissertation addresses the issues on the persistence of poverty. Both policymakers and economists agree that one reason why the phenomenon of stagnating poverty rates is so difficult to understand and to treat lies in the inadequate measurement instruments that are used to identify poverty. To help public and policymakers better understand the incidence of poverty persistence, the study employs the SST poverty intensity index as the poverty measure, and finds that not only the number of poor population has persisted since the mid 1970s, but their economic poverty position has also deteriorated over time, in particular, young and middle-aged households. This deteriorating economic position in poverty of the low-income households is apparently consistent with the findings from Cutler and Katz (1991) and Blank (1993, 2000). There occur the unfavorable changes in labor market towards low-skilled and less-educated workers during the past economic expansions.

Furthermore, the study observes the cyclical change in the economic poverty position between the pre-1984 and the post-1984 periods, especially for middle-aged and old households. The break point in 1984 is where Stock and Watson (2003) suggest that the business cycle has considerably changed, and also it is the period, in which the anti-poverty effect of economic expansion started losing its power (Blank, 1993; Cutler and Katz, 1991).

Since changes in business cycle could reflect through the attitude on uncertainty, that may lead to changes in consumption and saving behaviors, hence, the economic poverty position. This research finds that the moderation in the business cycle has an impact on the economic poverty position of low-income households, particularly the old households. Additionally, this dissertation finds that the fixed effects or individual's permanent characteristics related to innate ability and education have a profound effect to labor efficiency and the economic poverty position. Thus, this finding is very crucial for policymakers and government to design effective poverty-aid programs and welfare reforms perhaps through education and skill trainings that improve labor productivity of the working poor, which in turn raise their labor earnings. Consequently, this could help the economic poverty position of the low-income households or even move them out of poverty.