James X. Sullivan

Borrowing During Unemployment: Unsecured Debt as a Safety Net

This paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment-induced earnings losses. Results indicate that very low-asset households—those in the bottom decile of total assets—do not borrow in response to these shortfalls. However, other low-asset households do borrow, increasing unsecured debt by more than 11 cents per dollar of earnings lost. In contrast, wealthy households do not increase unsecured debt during unemployment. The evidence suggests that very low-asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells.

Five Decades of Consumption and Income Poverty

This paper examines poverty in the United States from 1960 through 2005. We investigate how poverty rates and poverty gaps have changed over time, explore how these trends differ across family types, contrast these trends for several different income and consumption measures of poverty, and consider explanations for the differences in trends. We document sharp differences, particularly in recent years, between different income poverty measures, and between income and consumption poverty rates and gaps. Moving from the official pre-tax money income measure to a disposable income measure that incorporates taxes and transfers has a substantial effect on poverty rate changes over the past two decades. Furthermore, consumption poverty rates often indicate large declines, even in recent years when income poverty rates have risen. We show that bias in the CPI-U has a sizable effect on changes in poverty. Between the early 1960s and 2005, an income poverty measure that corrects for bias in this price index declines by 14 percentage points more than a comparable measure based on the CPI-U. The patterns are very different across family types, with consumption poverty falling much faster than income poverty for single parents and the elderly, but more slowly for married couples with children. Income and consumption measures of deep poverty and poverty gaps have generally moved sharply in opposite directions in the last two decades with income deep poverty and poverty gaps rising, but consumption deep poverty and poverty gaps falling. While relative poverty rose in the early 1980s, changes in relative poverty have been fairly small since 1990. We examine the role that demographics, taxes, and transfers play in explaining changes in poverty over the past three decades. We also consider whether measurement error, saving and dissaving, and other explanations can account for income and consumption differences.

Viewpoint: Further results on measuring the well-being of the poor using income and consumption

We evaluate the relative merits of income- and consumption-based measures of well-being. Our results provide evidence that consumption better captures well-being for those with few resources. The bottom deciles of expenditures exceed those of income, suggesting under-reporting of income. The under-reporting rate for government transfers is high and rising. Overall non-response is more severe in U.S. income data than in expenditure data. Furthermore, a consumption data set requires fewer observations than an income data set to obtain the same level of precision for typical estimates. Finally, very low consumption is more strongly related to other bad outcomes than very low income.

Winning the War: Poverty from the Great Society to the Great Recession

We consider the long-run patterns of poverty in the United States from the early 1960s to 2010. Our results contradict previous studies that have argued that poverty has shown little improvement over time or that antipoverty efforts have been ineffective. We find that moving from traditional income-based measures of poverty to a consumption-based measure and, crucially, adjusting for bias in price indexes lead to the conclusion that the poverty rate declined by 26.4 percentage points between 1960 and 2010, 8.5 percentage points of which has occurred since 1980. Our consumption-based measure suggests considerably greater improvement than the income-based measures for single-parent families and the elderly, but relatively less for married-parent families. Changes in tax policy explain a substantial part of the decline in poverty; Social Security has also been important, but other transfer programs have played a small role. Changes in education have also contributed, but other demographic trends have had little impact. Measurement error in income likely explains some of the most noticeable differences between changes in income poverty and in consumption poverty, but saving and dissaving appear to play a modest role for most demographic groups.

Viewpoint: Further Results on Measuring the Well-Being of the Poor Using Income and Consumption (Rsultats Additionnels Sur La Mesure Du Bien-Tre Des Pauvres En Utilisant Revenu Et Consommation)

We evaluate the relative merits of income- and consumption-based measures of well-being. Our results provide evidence that consumption better captures well-being for those with few resources. The bottom deciles of expenditures exceed those of income, suggesting under-reporting of income. The under-reporting rate for government transfers is high and rising. Overall non-response is more severe in U.S. income data than in expenditure data. Furthermore, a consumption data set requires fewer observations than an income data set to obtain the same level of precision for typical estimates. Finally, very low consumption is more strongly related to other bad outcomes than very low income.

Consumption and Income Poverty over the Business Cycle

We examine the relationship between the business cycle and poverty for the period from 1960 to 2008 using income data from the Current Population Survey and consumption data from the Consumer Expenditure Survey. This new evidence on the relationship between macroeconomic conditions and poverty is of particular interest given recent changes in anti-poverty policies that have placed greater emphasis on participation in the labor market and in-kind transfers. We look beyond official poverty, examining alternative income poverty and consumption poverty, which have conceptual and empirical advantages as measures of the well-being of the poor. We find that both income and consumption poverty are sensitive to macroeconomic conditions. A one percentage point increase in unemployment is associated with an increase in the after-tax income poverty rate of 0.9 to 1.1 percentage points in the long-run, and an increase in the consumption poverty rate of 0.3 to 1.2 percentage points in the long-run. The evidence on whether income is more responsive to the business cycle than consumption is mixed. Income poverty does appear to be more responsive using national level variation, but consumption poverty is often more responsive to unemployment when using regional variation. Low percentiles of both income and consumption are sensitive to macroeconomic conditions, and in most cases low percentiles of income appear to be more responsive than low percentiles of consumption.

The impact of homelessness prevention programs on homelessness

Programs that buffer a financial shock work For people without a safety net of social and financial resources, a shock, such as medical expenses not covered by insurance, can be the first step in a downward spiral toward homelessness and morbidity. Evans et al. evaluate the effectiveness and cost of a program in Chicago that provides temporary financial assistance with the aim of enabling individuals to stay in their homes and out of homeless shelters. They find that one-time payments of up to

The Role of Nonprofits in Designing and Implementing Evidence-Based Programs

1500 greatly reduce the likelihood of homelessness. The estimated economic benefits exceed the estimated costs, with immeasurable psychic and physical benefits. Science, this issue p. 694 Temporary financial assistance can be used successfully to prevent homelessness, is affordable, and helps individuals and families. Despite the prevalence of temporary financial assistance programs for those facing imminent homelessness, there is little evidence of their impact. Using data from Chicago from 2010 to 2012 (n = 4448), we demonstrate that the volatile nature of funding availability leads to good-as-random variation in the allocation of resources to individuals seeking assistance. To estimate impacts, we compare families that call when funds are available with those who call when they are not. We find that those calling when funding is available are 76% less likely to enter a homeless shelter. The per-person cost of averting homelessness through financial assistance is estimated as

The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences

10,300 and would be much less with better targeting of benefits to lower-income callers. The estimated benefits, not including many health benefits, exceed

The relationship between income and material hardship

20,000.