The Influence of Government Benefits and Taxes on Rates of Chronic and Transient Poverty in the United States


By bhadmin February 2, 2021

This study examines the influence of social welfare and tax policies on rates of chronic and transient poverty in the United States for the full population and subgroups. I use longitudinal data from the Panel Study of Income Dynamics (n = 10,210) over a recent 11-year time frame (1998–2008), with individuals categorized as poor using the Supplemental Poverty Measure. Results show that including government transfers in family resources reduces the overall transient poverty rate by more than one-sixth and the chronic poverty rate by nearly four-fifths, with a greater influence on the chronic rate in part because some individuals shift from chronic into transient poverty. Income and payroll tax liabilities have negligible influence on poverty rates net of tax credits. Medical expenses are largely associated with an increase in the transient poverty rate. Results imply that there is value to examining the effects of social policy on poverty from more than just the traditional cross-sectional perspective.

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