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The Impact of Transfers and Taxes on Alternative Poverty Indexes

Author

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  • Robert Defina
  • Kishor Thanawala

Abstract

Changes in the headcount rate are the standard metric for gauging how public transfers and taxes affect US poverty. An alternative strategy, one theoretically more appealing and complete, is to rely on distribution-sensitive indexes (Sen 1976, 1981). How would policy's measured impacts change if such an approach were to be used? This study provides empirical evidence using three selected poverty indexes from the class developed by Foster et al . (1984). Pre- and post-policy values of each index are estimated for the total population and for twenty-three demographic sub-groups using data from March Current Population Surveys covering the period 1992 to 1998. The results indicate that the alternative indexes produce consistent ordinal rankings of policy's impact. (In contrast, the measured cardinal effects of policy differ substantially across indexes.) The empirical evidence has a clear implication for anti-poverty policy: government transfers and taxes are effective in lowering poverty headcount rates, in reducing the depth of poverty and in lessening the relative deprivation among the poor.

Suggested Citation

  • Robert Defina & Kishor Thanawala, 2001. "The Impact of Transfers and Taxes on Alternative Poverty Indexes," Review of Social Economy, Taylor & Francis Journals, vol. 59(4), pages 395-416.
  • Handle: RePEc:taf:rsocec:v:59:y:2001:i:4:p:395-416
    DOI: 10.1080/00346760127070
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    Cited by:

    1. Kishor Thanawala & Robert DeFina, 2002. "International Evidence on the Impact of Transfers and Taxes on Alternative Poverty Indexes," LIS Working papers 325, LIS Cross-National Data Center in Luxembourg.
    2. Amie Bostic, 2023. "Family, Work, Economy, or Social Policy: Examining Poverty Among Children of Single Mothers in Affluent Democracies Between 1985 and 2016," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 42(4), pages 1-57, August.

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