This study examines both the dynamics behind changes in the poverty rate over time and the events that trigger entries into and exits from poverty. We decompose the poverty rate and examine how the number of entries into and exits from poverty relate to changes in the poverty rate over time. This decomposition answers questions such as “In periods where poverty rates remained high, was it because the number of entries and exits were high or low?”
In analyzing events that trigger entries into and exits from poverty, we use both descriptive statistics and discrete-time multivariate hazard models. The events examined are motivated by the conceptual model, and include changes in household composition, labor supply, disability status, educational attainment, and economic conditions. Our multivariate approach disentangles the relationship between one event and poverty transitions from that of other events and demographic characteristics, thereby providing information about the role specific events play in individuals' entries into and exits from poverty. Several studies have examined the relationship between events and poverty transitions, but most use only descriptive analyses. While informative, descriptive analyses provide limited information because individuals can experience more than one event at a time, thereby making it impossible to disentangle the relationship between one event and a poverty transition from that of other events or demographic characteristics. This study also examines whether the events that trigger poverty entries and exits differ for long versus short spells of poverty and whether they have changed over time.
We examine poverty transitions using two nationally representative longitudinal data sets. We use yearly data from the 1975 panels of the Panel Study of Income Dynamics (PSID) and monthly data from the 1988, 1990, and 1996 panels of the Survey of Income and Program Participation (SIPP). Our analysis of PSID data includes an examination of whether trigger events differ for persons entering/exiting poverty spells of four or less years (short spells) and more than four years (long spells). And, using the SIPP, we examine whether the trigger events differ in the 1988-92 period—prior to welfare reform—and the 1997-99 period—after welfare reform. Our three research questions and findings are discussed below.