The Ins and Outs of Poverty in Advanced Economies: Poverty Dynamics in Canada, Germany, Great Britain, and the United States

Abstract

Comparative analysis of poverty dynamics—incidence, transitions, and persistence—can yield important insights about the nature of poverty and the effectiveness of alternative policy responses. This manuscript compares poverty dynamics in four advanced industrial countries (Canada, unified Germany, Great Britain, and the United States) for overlapping six-year periods in the 1990s. The data indicate that poverty persistence is higher in North America than in Europe; for example, despite high incidence, poverty in Great Britain is relatively transitory. Most poverty transitions, and the prevalence of chronic poverty, are associated with employment instability and family dissolution in all four countries. The results also suggest that differences in social policy are crucial for the observed differences in poverty incidence and persistence between Europe and North America. * For their comments, the author thanks Mary Daly and seminar participants at the June 2002 Federal Reserve System Applied Microeconomics meeting and the May 2003 meeting of Bay Area Labor Economists (especially Peggy O’Brien-Strain). This work is based in part on the author’s contribution to Chapter 2 of the OECD Employment Outlook June 2001 (in conjunction with Paul Swaim and Agnes Puymoyen). Howard Lin and especially Geoff MacDonald provided invaluable research support. Special thanks go to Dean Lillard of Cornell University for his help with the CNEF files, various staff at Statistics Canada for their help with the Canadian SLID portion of the CNEF, and Stephen Jenkins for advice on use of the BHPS portion of the CNEF. None of these individuals are responsible for any errors. The views expressed in this paper are those of the author and should not be attributed to the Federal Reserve Bank of San Francisco or the Federal Reserve System.