Eugene Smolensky

HOMELESS IN AMERICA, HOMELESS IN CALIFORNIA

It is generally believed that the increased incidence of homelessness in the United States has arisen from broad societal factors, such as changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, and so forth. This paper presents a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We assemble essentially all the systematic information available on homelessness in U.S. urban areas: census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We estimate similar statistical models using four different samples of data on the incidence of homelessness, defined according to very different criteria. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest-quality housing explain a large portion of the variation in homelessness among U.S. metropolitan housing markets. Furthermore, rather modest improvements in the affordability of rental housing or its availability can substantially reduce the incidence of homelessness in the United States.

The life-cycle hypothesis and the consumption behavior of the elderly

The life-cycle hypothesis (LCHO) is based on the common-sense idea that households do not make saving or dis saving decisions solely on the basis of their current income and wealth, but that they also take into account their expected future circumstances and are affected by their past experience. In particular, because people can anticipate that their incomes will fall sharply when they retire, they save when younger and dissave after retirement so as to maintain, more or less, their previous standards of living. This paper presents new data on income and consumption that are more appropriate for testing the LCHO than the data used in previous studies. Then we examine the average propensities to consume of the elderly and nonelderly and show how they do not accord with the LCHO. The LCHO predicts that the elderly dissave, or at least that they have a significantly higher average propensity to consume, at a given level of income, than the nonelderly. In fact, we found strong evidence to the contrary; i.e., the elderly not only do not dissave to finance their consumption during retirement, they spend less on consumption goods and services (save significantly more) than the nonelderly at all levels of income. Moreover, the oldest of the elderly save the most at given levels of income. After testing some adjustments that attempt to salvage the LCHO, we suggest alternative explanations for the observed higher average propensities to consume of the elderly.

Post-Fisc Distributions of Income in 1950, 1961, and 1970

Distributions of income after allocating all government taxes and expenditures to households are compared over two decades. Extending prior work back an additional decade and adding extensive sensitivity analyses leave our earlier conclusions unaffected. Specifically, despite efforts towards a more egalitarian distribution and a sizable increase in benefits accruing to the low end of the distribution, aggregate income dispersion in final distributions changed very little between 1950 and 1970.

The level and trend of poverty in the United States, 1939-1979.

A detailed record of the number and characteristics of persons in poverty is available since 1959. This paper provides measures for 1939 and 1949 that correspond as closely as possible to the official poverty statistics. Poverty as officially measured fell from 40.5 percent of all persons in 1949 to 13.1 percent in 1979 declining most among the elderly and least among female-headed households. We estimate the effects on the aggregate poverty rate of changes between 1940 and 1980 in the distribution of the population by selected demographic characteristics of household heads and by the employment status of head and spouse. Some changes such as the increasing proportion of two-earner families were poverty reducing whereas others were poverty increasing. (EXCERPT)

Public Assistance, Female Headship, and Economic Well-Being.

In recent years there has been a rapid growth in the number of households headed by women and in the proportion of these households receiving public assistance. This paper presents a model to test the hypothesis that changes in the public assistance system contributed to the increase in these households. Current Population Survey data on the number of women in various household status categories and the level of economic well-being associated with these categories are analyzed. Major findings

Trade‐offs implicit in child‐support guidelines

Recent U.S. federal legislation required states to establish mandatory judicial guidelines for the setting of child-support awards. An equivalence-based approach is used to compare three formulae (two in use, one proposed) to three theoretical benchmarks, to clarify unavoidable trade-offs in the choice of a guideline. Generally, the formulae in use leave children worse off economically than would the benchmark formulae. Since the economic well-being of children cannot be separated from that of their custodial parent, that which most privileges childrens welfare will usually privilege the custodial parent over the absent parent, and what appears more fair between the two adults may be less favorable to the children. Another possible trade-off is between childrens welfare and work incentives: The guidelines that prescribe larger awards are those with higher implied marginal tax rates. Despite their work disincentive effects, the formulae with higher marginal tax rates are more favorable to childrens economic interests.

Should public assistance be targeted

(1995). Should Public Assistance Be Targeted? Journal of Post Keynesian Economics: Vol. 18, No. 1, pp. 3-28.

Municipal Financing of the U.S. Fine Arts Museum: A Historical Rationale

Municipal involvement in the finance of fine arts museums raises the question: Just which market failure serves to rationalize this public subsidy? Two contenders are prominent in the literature: decreasing costs and education externalities. The relationship of price to marginal cost provides an operational test to distinguish among the two rationales. Scattered data from the 1880s and 1890s as well as contemporary discussion indicate that, implausible as it may seem now, education externalities constituted the operational justification for the public subsidy.

The Fading Effect of Government on Inequality

Most of those who discuss the question of income distribution exaggerate the power of government to change it. This is because they fail to examine the historical evidence. Of course, Pareto, the father of the modern analysis of income distribution, had little confidence in governments power to alter the distribution permanently. But the sheer bulk and power of the modern welfare state have led many to depart from Paretos view. In a recently published book (Morgan Reynolds and Eugene Smolensky, Public Expenditures, Taxes, and the Distribution of Income, New York: Academic Press, 1977), we showed that when the benefits of all government expenditures were added to the labor and capital incomes of U.S. households and the burden of all taxes was subtracted, the overall distribution of income had not changed significantly between 1950 and 1970. To be sure, the distribution of income which included the effects of government budgets was significantly closer to equality than the distribution made up of just labor and capital income, but we could not detect any significant trend in the degree of inequality. Our best estimates showed, for example, that the lowest twenty percent of house-

Searching for Explanations

The stability of inequality is a source of distress to all sensitive egalitarians. [K. Boulding 1975, p. 1]