Poverty Reduction through Federal and State Policy Mechanisms: Variation Over Time and Across the U.S. States

The efficacy of U.S. antipoverty policy is shaped both by its reliance on categorical sorting and by its decentralized structure. To examine the implications of these features, this study introduces a novel disaggregation of U.S. poverty reduction instruments into four mechanisms: taxes and transfers at the (centralized) federal level, and taxes and transfers at the (decentralized) state level. Using microdata from the Current Population Survey’s Annual Social and Economic Supplement, and a sequence-independent decomposition, this analysis assesses the relative effectiveness of the four mechanisms over time at the national level, between 1996 and 2016, and across the U.S. states in 2016. The study finds that absolute and relative poverty reduction is greater and has increased over time for working-age households with children compared to those without children, a difference rooted in the disparate structures of the programs that serve them. The study also finds substantial variation across the U.S. states in market and disposable income poverty, and in the poverty reduction attributable to each of the redistributive mechanisms, which highlights the importance of examining poverty and antipoverty policy subnationally. (Stone Center on Socio-Economic Inequality Working Paper)