Transition Events in the Dynamics of Poverty. Multivariate Analysis

09/01/2002

Our multivariate analyses show that employment changes are the events most closely associated with entries into and exits from poverty. This is, in general, followed by shifts in household structure—two-adult to female-headed households and vice versa. These and other results are presented in Tables 6 through 9.(38) First, we discuss the poverty entry results for the PSID and SIPP (Tables 6 and 7) and then discuss the poverty exit results (Tables 8 and 9).

For the explanatory variables in each table, three numbers are presented—the coefficient, standard error, and change in the likelihood (i.e., probability) of entering/exiting poverty with a change in the explanatory variable. This third number provides a straightforward interpretation of the relationship between the explanatory variable and poverty, something the regression coefficient does not provide.(39) To calculate, for example, how a shift from a two-adult to a female-headed household affects the likelihood of entering poverty, we (1) calculate the likelihood of entering poverty when the household structure shift occurs, (2) calculate the likelihood of entering poverty when the household structure shift does not occur, and (3) calculate the difference between these two likelihoods.(40) This difference in the likelihood of entering poverty in these two scenarios provides an estimate of how the probability of entering poverty changes with a shift from a two-adult to a female-headed headed household.

 

Table 6—PSID Data:  Determinants of Individuals' Poverty Entry
Coefficient Estimates and Simulated Effects from Poverty Duration Hazard Model
Explanatory Variables All Poverty spell of four or less years Poverty spell of more than four years
Entry Trigger Events (at t and lagged)
Change in Household Composition
Child under age 6 enters household, t 0.351 0.138 0.045
  (0.094)** -0.194 -0.286
   [0-1] [0.011] [0.020] [0.007]
Child under age 6 enters household, t-1 0.406 0.111 0.334
  (0.099)** -0.027 -0.384
   [0-1] [0.013] [0.016] [0.051]
Two-adult becomes female-headed household, t 1.521 1.477 1.371
  (0.132)** (0.270)** (0.523)**
   [0-1] [0.074] [0.266] [0.225]
Two-adult becomes female-headed household, t-1 1.081 0.522 -0.248
  (0.143)** -0.286 -0.561
   [0-1] [0.045] [0.083] [-0.036]
Young adults sets up own household, t 0.031 0.289 0.032
  -0.179 -0.369 -0.599
   [0-1] [0.001] [0.044] [-0.005]
Young adults sets up own household, t-1 0.385 0.276 -0.917
  (0.138)** -0.299 -0.626
   [0-1] [0.012] [0.042] [-0.122]
Change in Labor Supply
Loss of employment, head, t 1.797 1.593 1.847
  (0.087)** (0.181)** (0.275)**
   [0-1] [0.095] [0.292] [0.317]
Loss of employment, head, t-1 0.969 0.769 1.011
  (0.112)** (0.227)** (0.388)**
   [0-1] [0.038] [0.129] [0.163]
Loss of employment, spouse, t 1.078 0.622 0.186
  (0.084)** (0.187)** -0.433
   [0-1] [0.043] [0.099] [0.028]
Loss of employment, spouse, t-1 0.392 0.21 -0.081
  (0.107)** -0.208 -0.438
   [0-1] [0.012] [0.032] [-0.012]
Loss of employment, others in household, t 0.837 0.925 0.842
  (0.084)** (0.168)** (0.321)**
   [0-1] [0.030] [0.154] [0.133]
Loss of employment, others in household, t-1 0.275 -0.017 0.794
  (0.104)** -0.216 (0.349)*
   [0-1] [0.008] [-0.002] [0.126]
Change in Disability Status
Head becomes disabled, t 0.490 -0.113 0.233
  (0.083)** -0.179 -0.371
   [0-1] [0.016] [-0.016] [0.035]
Head becomes disabled, t-1 0.255 0.131 0.231
  (0.089)** -0.173 -0.307
   [0-1] [0.008] [0.019] [0.035]
Change in Economic Status
Change in state unemployment rate, t 0.057 0.051 0.046
  (0.028)* -0.058 -0.103
   [0-0.5] [0.001] [0.004] [0.003]
Change in state unemployment rate, t-1 0.01 -0.009 0.058
  -0.027 -0.06 -0.116
   [0-0.5] [0.000] [-0.001] [0.004]
Change in GDP, t (in billions) 0.001 0.000 0.000
  0 -0.001 -0.001
   [0-180] [0.003] [0.003] [0.004]
Change in GDP, t-1 (in billions) 0 -0.001 0
  0 -0.001 -0.001
   [0-180] [-0.000] [-0.019] [-0.001]
 
Demographic Characteristics of Household Head
Age:
Less than 25 0.248 0.337 0.117
  (0.087)** -0.172 -0.376
   [0-1] [0.007] [0.052] [0.018]
Greater than or equal to 55 0.162 0.21 -0.008
  (0.070)* -0.149 -0.251
   [0-1] [0.005] [0.031] [-0.001]
Race:
Black 0.558 0.229 0.652
  (0.059)** -0.129 (0.216)**
   [0-1] [0.018] [0.034] [0.100]
Educational attainment:
Equal to high school -0.525 -0.345 -0.449
  (0.058)** (0.127)** -0.236
   [0-1] [-0.014] [-0.049] [-0.065]
More than high school -1.017 -0.303 -0.531
  (0.064)** (0.149)* -0.307
   [0-1] [-0.026] [-0.042] [-0.075]
Household Composition
Female-headed household for two or more years 1.105 0.528 0.837
  (0.064)** (0.141)** (0.245)**
   [0-1] [0.041] [0.081] [0.129]
Single male-headed household 1.069 0.824 1.302
  (0.074)** (0.177)** (0.375)**
   [0-1] [0.043] [0.136] [0.210]
Number of adults (less head and wife) -0.038 -0.127 -0.140
  -0.035 (0.064)* -0.108
   [0-1] [-0.001] [-0.018] [-0.021]
Number of children 0.255 0.195 0.223
(less children that enter at t and t-1) (0.024)** (0.047)** (0.071)**
   [0-1] [0.006] [0.032] [0.032]
Geographic Characteristics
Region at t-1:
Northeast -0.140 0.326 0.58
  -0.074 -0.171 -0.344
   [0-1] [-0.004] [0.049] [0.090]
Midwest 0.003 0.059 -0.082
  -0.06 -0.14 -0.228
   [0-1] [-0.000] [0.009] [-0.012]
West -0.082 -0.103 -0.098
  -0.076 ( 0.171)* -0.457
   [0-1] [-0.002] [-0.015] [-0.015]
Pacifica 0.044 -- --
  -0.525 -- --
   [0-1] [0.001] -- --
Urban area
MSA -0.293 -0.18 -0.478
  (0.052)** -0.113 -0.248
   [0-1] [-0.008] [-0.026] [-0.071]
Economic Characteristics
State unemployment rate, t 0.027 0.045 -0.003
  -0.015 -0.03 -0.054
   [0-0.5] [0.000] [0.003] [-0.000]
GDP, t (in ten billions) -0.004 0.032 0.046
  -0.009 (0.020)* -0.03
   [0-180] [-0.016] [0.841] [0.905]
Spell Information, Non-Poverty
Observed duration
1 year -0.711 -0.552 -0.542
  (0.094)** (0.186)** -0.297
2 years -1.037 -0.96 -0.983
  (0.102)** (0.219)** (0.332)**
3 years -1.044 -1.027 -0.595
  (0.111)** (0.218)** -0.383
4 years -1.324 -0.926 -0.963
  (0.114)** ( 0.235)** (0.367)**
5 years -1.382 -0.991 -0.88
  (0.124)** (0.257)** (0.444)*
6 years -1.589 -0.711 -1.492
  (0.131)** (0.270)** (0.526)**
7 years -1.667 -1.557 -1.588
  (0.133)** (0.332)** (0.472)**
8 years -1.469 -0.771 -0.756
  (0.143)** (0.306)* -0.523
9 years -1.445 -0.496 -0.967
  (0.152)** -0.341 -0.619
10 years -1.649 -1.001 0.139
  (0.155)** -0.307 -0.578
11 years -1.708 -0.736 -0.89
  (0.163)** (0.403)** -0.733
12 years -1.906 -1.152 -4.154
  (0.165)** (0.391)** (0.784)**
13 years or more years -1.603 -0.636 -0.222
  (0.127)** -0.329 -0.619
Other
Left-censored spell -0.468 -0.326 -0.816
  (0.066)** (0.148)** (0.289)**
Number of previous spells (observed) 0.228 0.103 -0.209
  (0.036)** ( 0.085)** -0.139
Year at t-1
1980-1989 0.397 0.095 0.36
  (0.128)** -0.266 -0.442
1990-1996 0.530 0.181 1.681
  (0.232)* -0.506 (0.839)*
Sample size 217,427 9,039 3,537
Notes:
a) The variable for Pacific was dropped from the models in columns 2 and 3 because too few people were identified as living in the Pacific region.
b) * denotes statistical significance at the 5 percent level; ** denotes statistical significance at the 1 percent level.
c) Standard errors are in parenthesis. The numbers in brackets are the simulated percentage point change in the likelihood of entering poverty when the explanatory variable changes by the value indicated in the column labeled "Explanatory Variables" (typically from 0 to 1 [0-1]).

Poverty Entries

PSID: Individuals experiencing many of our “trigger events” are significantly more likely to enter poverty, even after controlling for other events that may occur during the same time period as well as demographic characteristics and economic conditions (Table 6, column 1).(41) We find that household events including household composition changes, employment changes, and disability changes are related to poverty entries. We also find that increases in the unemployment rate increase poverty entries. Of the trigger events examined, individuals living in households that experience a loss of employment are the most likely to enter poverty, followed by individuals in households that shift from being headed by two adults to being headed by only a female. This finding differs from those in our descriptive analysis, as the descriptive results suggest that shifts in household structure are more important than changes in employment. Controlling for characteristics of the household, many of which are related to female headship including minority status and having low levels of education, reduces the observed relationship between household structure shifts and poverty, and employment changes emerge as most strongly related to poverty entries. Our findings also suggest that many of the household, geographic, and economic characteristics are significantly related to poverty entries, as well as the poverty and non-poverty spell information.

Individuals experiencing all three household composition trigger events are more likely to enter poverty than individuals not experiencing these events. Persons who have a child under age six enter their household or shift from a two-adult to a female-headed household this year (at time t) or last year (at time t-1) are more likely to enter poverty this year, whereas young adults (under age 25) who set up their own households are not more likely to enter poverty in the year they make this transition, but are more likely to enter poverty one year later (i.e., a shift last year, t-1, is related to poverty entry this year, t). It may be that young adults who set up their own households receive financial support from a parent or other relative in the first year they live on their own, but that the support discontinues in subsequent years.

The probability of entering poverty is 2.4 percentage points higher for persons living in households that have a child under age six enter. If the child entered the household this year, the probability of entering poverty is higher by 1.1 percentage points and if the child entered last year the probability is higher by 1.3 percentage points, providing the total effect of 2.4 percentage points. The likelihood of entering poverty increases considerably if the household shifts from a two-adult to a female-headed household. The probability of entering poverty is 11.9 percentage points higher for persons who experience this shift in household structure—the probability of entering poverty is higher by 7.4 percentage points if the shift occurred this year and by 4.5 percentage points if the shift occurred last year. Setting up ones’ own household in the previous year is associated with a higher likelihood of entering poverty in the current year by 1.2 percentage points.

All three employment transition events and their lags are significantly related to poverty entry. The loss of employment by the household head has the largest impact on poverty entry. The probability of entering poverty is higher by 9.5 percentage points if the household head lost his/her job this year and by 3.8 percent if the job loss occurred last year—for a total effect of 13.3 percentage points. The loss of employment by a spouse or other household members has a smaller, yet significant, relationship with poverty entries—the likelihood of entering poverty is higher by a total (this year and last year) of 5.5 percentage points if the spouse loses a job and by a total of 3.8 percentage points if another household member loses a job. Our finding that the loss of employment in the previous year is related to poverty entries in the current year suggests that some individuals are able to keep themselves out of poverty in the year the job loss occurs, perhaps because of government transfers such as unemployment insurance benefits, but that they enter poverty in the following year.

Individuals living with a household head who becomes disabled are more likely to enter poverty. The probability of entering poverty when the household head becomes disabled is higher by a total of 2.4 percentage points. The final two events are changes in economic conditions. We find that a 0.5 percentage point increase in the unemployment rate increases the likelihood of entering poverty by only 0.1 percentage points, and that GDP has no significant effect on poverty entries.(9)

Many of the model’s control variables also help to explain poverty entry. Characteristics of the household head including his/her age, race, and educational attainment are related to poverty entry. Persons living in a household headed by an individual under age 25 or age 55 or older are more likely to enter poverty than persons whose household head is between ages 25 and 54. Consistent with analyses by Eller (1996), Naifeh (1998), and Rank and Hirschl (1999a and 1999b), persons who live in households headed by black individuals are more likely to enter poverty than persons who live in households headed by non-black individuals. We also find that higher educational attainment of the household head is associated with a lower probability of entering poverty. Persons who live in households headed by individuals with more than a high school degree are the least likely to enter poverty, followed by persons in households where the head has a high school degree only, and finally, those in households headed by persons with no high school degree are the most likely to enter poverty.

Household structure also plays a role in poverty entries. Person in households that have been female-headed for two or more years, as well as persons in single male-headed households (i.e., a male heads the household without a female partner), are more likely to enter poverty than persons in two-adult households.(10) The presence of dependent children in the household is also related to entries—the likelihood of entering poverty is higher for persons in households with more children. We also find that individuals who live in metropolitan areas are less likely to enter poverty, which may be due to the fact that there tends to be more employment opportunities in metropolitan areas as compared to non-metropolitan areas. The level of the state unemployment rate also matters. Facing a high unemployment rate increases the likelihood of entering poverty.

In terms of spell information, we find that the length of the non-poverty spell matters. The probability of entering poverty declines as we observe the individual out of poverty for more years, although the largest difference occurs in the first few years. This pattern in the coefficients suggests that one of the following is taking place: (1) persons who have longer non-poverty spells are different from persons with shorter non-poverty spells in a way that the model does not capture (e.g., more disciplined and hard-working), and that these unobserved differences produce the pattern;(11) (2) there is duration dependence; or (3) a combination of the two. Because it is unlikely that our model captures all differences between individuals, it is unlikely that this series of coefficients is identifying a pure duration dependence effect.

Having a prior (observed) non-poverty spell, which indicates that a poverty spell has occurred, increases ones’ probability of entering poverty. That is to say, persons who have previously experienced a spell of poverty are more likely to enter poverty than persons who have never been in poverty. Finally, we find that individuals whose spell information is left-censored are less likely to enter poverty. This finding is not surprising as persons whose non-poverty spells are left-censored likely have a longer non-poverty spell than what is observed in the data.

Likelihood of Entering Poverty if Event Occurs: From these multivariate estimates we calculate the overall likelihood of entering poverty if an individual experiences a particular event (not shown in table).(12) Recall from our descriptive analysis that the average likelihood of entering poverty in a year is 3.4 percent. The multivariate results suggest that the likelihood of entering poverty is higher for persons living in households with an employment loss, a shift in household composition, and the onset of a disability. The likelihood of entering poverty is highest, all else equal, for persons living in households with a head who loses employment, 16.7 percent, which is significantly higher than the average entry likelihood of 3.4 percent. The likelihood of entering poverty if one shifts from two-adult to female-headed household is slightly lower at 15.3 percent. If the spouse loses employment, another household member loses employment, or the head becomes disabled the likelihood of entering poverty is 8.9 percent, 7.2 percent, and 5.8 percent, respectively. For the two remaining household composition shifts—child under age six enters household and young adult sets up own household—the likelihood of entering poverty if these events occur are 5.8 percent and 4.6 percent, respectively.

Short and Long Poverty Spells: The relationship between the trigger events and poverty entries may differ for persons entering short and long poverty spells, so we examine them separately. For example, a young adult who sets up his or her own household may enter a short poverty spell, but not a long poverty spell. A short poverty spell is defined as lasting four or less years and a long spell as lasting five or more years. It is not possible, however, to categorize every poverty spell as either short or long. The problem arises because some poverty spells have an observed duration of four or less years but the true duration is unknown because the end of the poverty spell is not observed (i.e., the spell is censored). In this case, the true length of the spell could be more than four years, and since it is not known whether it is a short or long spell, these spells are not included in either group. This categorization and elimination of censored spells results in 9,039 person-year observations in the analysis of entries into short poverty spells and 3,537 person-year observations in the analysis of entries into long poverty spells.(46)

Looking at the results for short and long spells, one general pattern emerges—fewer events are associated with entries into long poverty spells than short poverty spells. This lower level of statistical significance could, in part, be due to the smaller sample that these models are estimated on.

The only household composition trigger event significantly related to entries into short and long poverty spells is a shift from a two-adult to a female-headed household (Table 6, columns 2 and 3). Among those who experience a short spell of poverty, the probability of entering poverty increases by 26.6 percentage points if this household shift occurs. For those individuals who experience a long spell of poverty, the probability of entering poverty increases by 22.5 percentage points if the household shifts from two-adult to female-headed.

The employment loss of the household head and other household members are associated with higher probabilities of poverty entry for both groups, and these probabilities are similar. For both groups, employment of the head is the most important employment shift. The employment loss of the spouse is related only to entries into short poverty spells, not long poverty spells. We find no significant relationship between changes in the disability status of household heads and entries into long or short poverty spells. In addition, changes in the unemployment rate and in GDP are not found to affect entries into either short or long poverty spells.

SIPP: Even though the SIPP analysis examines monthly poverty entries and the PSID examines yearly poverty entries, the SIPP and PSID results are quite similar. This multivariate analysis of poverty entry with SIPP data confirms many of the PSID findings. Similar to the PSID entry results, we find that the loss of employment among family members is the event most related to poverty entries. Results from the 1996 SIPP panel analysis are presented first, and then are compared with findings from 1988-90 SIPP panels.

The 1996 SIPP results suggest that many of the entry trigger events are significantly related to individuals’ likelihood of entering poverty (Table 7). Employment losses are identified as the event most often associated with poverty entries. This is not, however, followed by shifts from two-adult to female-headed households, as in the PSID analysis. The next most important event is the entry of a child under age six into the household, followed by the onset of a disability of the household head and then a shift in household structure.

Loss of employment by the household head has the largest impact on poverty entry. The likelihood of entering poverty is higher by 12.3 percentage points for individuals living in a household where the household head stops working.(14) Losses of employment by the spouse and other family members have smaller, yet significant, effects: 6.0 percentage points for the spouse and 5.3 percentage points for others in the household. The percentages from the PSID analysis are quite similar—the likelihood of entering poverty increases by 13.3 percentage points if the head loses employment, 5 percentage points if the spouse loses employment, and 3.8 percentage points if another household member loses employment.

 

Table 7—SIPP Data: Determinants of Individuals' Poverty Entry
Coefficient Estimates and Simulated Effects form Poverty Duration Hazard Model
Explanatory Variables 1988 & 1990 Panels 1996 Panel
Entry Trigger Events (at t and lagged)
Change in Household Composition
Child under age 6 enters household, t 1.349 1.311
  (0.140)** (0.114)**
[0-1] [0.025] [0.027]
Child under age 6 enters household, t-1 0.342 0.261
  (0.116)** (0.104)*
[0-1] [0.004] [0.003]
Child under age 6 enters household, t-2 0.395 0.297
  (0.116)** (0.097)**
[0-1] [0.005] [0.004]
Child under age 6 enters household, t-3 0.066 0.318
  -0.138 (0.101)**
[0-1] [0.001] [0.004]
Child under age 6 enters household, t-4 0.235 0.168
  -0.136 -0.096
[0-1] [0.003] [0.002]
Two-adult becomes female-headed household, t 2.52 0.817
  (0.159)** (0.153)**
[0-1] [0.083] [0.013]
Two-adult becomes female-headed household, t-1 0.456 0.135
  (0.209)* -0.194
[0-1] [0.006] [0.002]
Two-adult becomes female-headed household, t-2 0.141 0.237
  -0.216 -0.186
  [0.001] [0.003]
Two-adult becomes female-headed household, t-3 0.26 0.309
  -0.237 -0.187
[0-1] [0.003] [0.004]
Two-adult becomes female-headed household, t-4 0.123 0.03
  -0.262 -0.186
[0-1] [0.001] [0.000]
Change in Labor Supply
Loss of employment, head, t 2.639 2.796
  (0.085)** (0.052)**
[0-1] [0.090] [0.111]
Loss of employment, head, t-1 0.747 0.704
  (0.114)** (0.067)**
[0-1] [0.010] [0.011]
Loss of employment, head, t-2 0.008 0.217
  -0.128 (0.067)**
[0-1] [0.000] [0.003]
Loss of employment, head, t-3 -0.133 -0.148
  -0.138 (0.071)*
[0-1] [-0.001] [-0.002]
Loss of employment, head, t-4 0.123 0.07
  -0.134 0.063
[0-1] [0.001] [0.001]
Loss of employment, spouse, t 0.797 1.886
  (0.118)** (0.076)**
[0-1] [0.011] [0.049]
Loss of employment, spouse, t-1 0.1 0.52
  -0.091 (0.081)**
[0-1] [0.001] [0.007]
Loss of employment, spouse, t-2 -0.002 0.164
  -0.108 (0.082)*
[0-1] [-0.000] [0.002]
Loss of employment, spouse, t-3 0.003 0.048
  -0.116 -0.085
[0-1] [0.000] [0.001]
Loss of employment, spouse, t-4 -0.067 0.162
  -0.128 (0.077)*
[0-1] [-0.001] [0.002]
Loss of employment, others in household, t 1.329 1.878
  (0.103)** (0.052)**
[0-1] [0.024] [0.048]
Loss of employment, others in household, t-1 0.093 0.348
  -0.084 (0.062)**
[0-1] [0.001] [0.005]
Loss of employment, others in household, t-2 0.056 0.112
  -0.085 -0.065
[0-1] [0.001] [0.001]
Loss of employment, others in household, t-3 0.064 0.054
  -0.086 -0.061
[0-1] [0.001] [0.001]
Loss of employment, others in household, t-4 -0.05 0.008
  -0.108 -0.063
[0-1] [-0.000] [0.000]
Change in Disability Status
Head becomes disabled, t 0.124 1.017
  -0.132 (0.102)**
[0-1] [0.001] [0.018]
Head becomes disabled, t-1 0.049 -0.618
  -0.1 (0.113)**
[0-1] [0.000] [-0.005]
Head becomes disabled, t-2 -0.044 0.302
  -0.102 (0.082)**
[0-1] [-0.000] [0.004]
Head becomes disabled, t-3 0.236 0.261
  (0.104)* (0.080)**
[0-1] [0.003] [0.003]
Head becomes disabled, t-4 0.172 0.068
  -0.14 -0.078
[0-1] [0.002] [0.001]
Change in Economic Status
Change in state unemployment rate, t 0.089 -0.011
  (0.033)** -0.033
[0-0.5] [0.000] [-0.000]
Change in state unemployment rate, t-1 -0.054 -0.059
  -0.042 -0.035
[0-0.5] [-0.000] [-0.000]
Change in state unemployment rate, t-2 -0.062 -0.079
  -0.049 (0.031)*
[0-0.5] [-0.000] [-0.000]
Change in state unemployment rate, t-3 -0.143 -0.042
  (0.044)** -0.031
[0-0.5] [-0.001] [-0.000]
Change in GDP, t (in billions) 0 0
  0 0
[0-180] [0.000] [-0.001]
Change in GDP, t-1 (in billions) 0.004 0
  (0.001)** 0
[0-180] [0.008] [-0.000]
Change in GDP, t-2 (in billions) -0.001 0.001
  -0.001 (0.000)**
[0-180] [-0.002] [0.002]
Change in GDP, t-3 (in billions) 0 0
  -0.001 0
[0-180] [0.000] [-0.000]
Demographic Characteristics of Household Head
Age:
Less than 25 0.544 0.259
  (0.054)** (0.048)**
[0-1] [0.007] [0.003]
Greater than or equal to 55 -0.41 -0.215
  (0.046)** (0.036)**
[0-1] [-0.004] [-0.002]
Race:
Hispanic 0.474 0.261
  (0.051)** (0.043)**
[0-1] [0.006] [0.003]
Black 0.464 0.3
  (0.050)** (0.037)**
[0-1] [0.005] [0.004]
Educational attainment:
Equal to high school -0.444 -0.363
  (0.042)** (0.036)**
[0-1] [-0.004] [-0.004]
More than high school -0.755 -0.582
  (0.044)** (0.037)**
[0-1] [-0.007] [-0.007]
   
Household Composition
Female-headed household for two or more years 0.276 0.504
  (0.059)** (0.033)**
[0-1] [0.003] [0.007]
Number of adults (less head and wife) -0.242 -0.238
  (0.025)** (0.024)**
[0-1] [-0.003] [-0.003]
Number of children 0.144 0.117
(less children that enter at t and t-1) (0.016)** (0.011)**
[0-1] [0.001] [0.001]
Geographic Characteristics
Region at t-1:
Northeast -0.154 -0.031
  (0.048)** -0.037
[0-1] [-0.001] [-0.000]
Midwest -0.053 -0.06
  -0.042 -0.036
[0-1] [-0.001] [-0.001]
West -0.029 -0.077
  -0.044 (0.038)*
[0-1] [-0.000] [-0.001]
Urban area
MSA -0.265 -0.256
  (0.037)** (0.032)**
[0-1] [-0.003] [-0.003]
Economic Characteristics
State unemployment rate, t 0.038 0.054
  (0.012)** (0.015)**
[0-0.5] [0.000] [0.000]
GDP, t (in ten billions) -0.022 0.003
  -0.025 -0.014
[0-180] [-0.038] [0.007]
Spell Information, Non-Poverty
Observed duration
0 months -3.289 -7.82
  (0.114)** (1.001)**
4-6 months -0.7 -0.603
  (0.061)** (0.050)**
7-9 months -0.714 -0.46
  (0.068)** (0.051)**
10-12 months -1.027 -0.887
  (0.080)** (0.057)**
13-15 months -1.327 -1.059
  (0.093)** (0.056)**
16-18 months -1.762 -1.633
  (0.101)** (0.068)**
19-21 months -1.151 -1.145
  (0.093)** (0.061)**
22-24 months -1.49 -1.227
  (0.105)** (0.068)**
25-27 months -1.455 -1.459
  (0.124)** (0.075)**
28 or more months -1.836 -1.638
  (0.143)** (0.063)**
Other
Left-censored spell -1.474 -0.947
  (0.053)** (0.040)**
Number of previous spells (observed) -0.394 -0.016
  (0.049)** -0.027
Year at t-1
1990 Panel 0.355  
  (0.083)**  
1998   0.084
    -0.054
1999   0.034
    -0.099
Sample size 2,034,658 2,211,724
Notes:
a) * denotes statistical significance at the 5 percent level; ** denotes statistical significance at the 1 percent level.
b) Standard errors are in parenthesis. The numbers in brackets are the simulated percentage point change in the likelihood of entering poverty when the explanatory variable changes by the value indicated in the column labeled "Explanatory Variables" (typically from 0 to 1 [0-1]).

Having a child under age six enter the household increases the likelihood of entering poverty by 3.8 percentage points, which is similar to the 2.4 percentage point increase found in the PSID analysis. Our second household composition trigger event has a substantially smaller relationship with poverty entries. Shifting from a two-adult to a female-headed household is found to increase the likelihood of entering poverty by only 1.3 percentage points, which is considerably smaller than the 11.9 percentage point increase found in our analysis of PSID data.

Changes Over Time: The SIPP results suggest that over the 1988-92 (i.e., 1988/1990 SIPP panels) to 1997-99 (i.e., 1996 SIPP panel) time period, shifts from two-adult to female-headed households—measured while controlling for shifts in employment—became less important in individuals' poverty entries.(48) Shifting from a two-adult to a female-headed household is important in the both periods, but is found to increase the likelihood of entering poverty by 8.9 percentage points in the 1988-92 period and only 1.3 percentage points in the 1997-99 period. Because changes in household structure are often associated with changes in employment, we estimated a second set of models that exclude employment changes (not shown). The results from these models show a similar relationship between poverty entries and household structure shifts in the 1988-92 and 1997-99 periods. One possible explanation for this pattern is that in the latter period changes in household structure are operating through employment to a greater extent than in the earlier period. Our analysis also suggests that the loss of employment became more important in individuals' poverty entries over this time period, particularly the employment of the spouse and other household members. For example, the loss of employment by the spouse increased the likelihood of entering poverty by 1.1 percentage points in the 1988-92 period, while the same employment loss increased the likelihood of entering poverty by 6.0 percentage points in the 1997-99 period.

Similar to the PSID results, many of the model’s control variables help to explain poverty entry. Race and educational attainment are both important. One difference is the relationship between age and poverty exits. In both SIPP analyses, we find that individuals in households headed by older adults (age 55 or older) are less likely to enter poverty, which differs from our PSID finding, but is consistent with a similar finding by Naifeh (1998), also using SIPP data (p. 70-63).

Like our PSID findings, we find that household composition also plays a role in poverty entry in the SIPP analyses. Persons in households that have been female-headed for two or more years are more likely to enter poverty than persons in two-adult and single male-headed households. The number of adults in the household and the presence of dependent children in the household also affects poverty entries—the likelihood of entering poverty decreases with the number of adults and increases with the number of children in the household.

Consistent with our findings from the PSID analysis, we find that individuals who live in metropolitan areas are less likely to enter poverty. Finally, the results suggest that economic conditions matter. An increase in the state unemployment rate is found to increase individuals' likelihood of entering poverty in both SIPP models. Again, we find that the duration of the poverty spell matters. The longer individuals are out of poverty the less likely they are to enter poverty.

Likelihood of Entering Poverty if Event Occurs: Again, the coefficients from the multivariate models are used to calculate the overall likelihood of entering poverty if an individual experiences a particular event (not shown in table).(16) The descriptive analysis shows that the average likelihood of entering poverty in a month is 1.1 percent in the 1988-92 period and 1.3 percent in the 1997-99 period. In the 1997-99 period, employment loses dominate the other events and are more likely to lead to a poverty entry. The likelihood of entering poverty in a month is 13.6 percent if the head loses employment, 7.3 percent if the spouse losses employment, and 6.6 percent if another family member loses employment—significantly higher than the average entry likelihood of 1.3 percent. In the 1988-92 period, these probabilities are somewhat lower: 11.1 percent, 2.2 percent, and 3.5 percent, respectively. As mentioned above, the most significant difference between the 1988-92 and 1997-99 period is the estimated relationship between household composition shifts and poverty entries. The likelihood of entering poverty if the household shifts from two-adult to female-headed (controlling for employment changes in the model) is 10.0 percent in the 1988-92 period, and is 2.6 percent in the 1997-99 period. If a child under age six enters the household, the likelihood of entering poverty is roughly 5 percent in both the 1988-92 and 1997-99 periods.

Poverty Exits

PSID: Similar to the poverty entry model, individuals experiencing many of the trigger events are significantly more likely to exit poverty, even after controlling for other events, demographic characteristics, and economic conditions (Table 8, column 1). Like our examination of poverty entries, the results suggest that shifts in employment are the most important events followed by shifts in household structure. These differ from our descriptive results which identified shifts in household structure as more important than shifts in employment. As discussed above, the events included in the poverty exit models differ somewhat from those included in the poverty entry models. A shift in household structure—from a female-headed to a two-adult household—is the only family composition trigger event included in the poverty exit models and we allow a change in educational attainment to affect exits.

We find that individuals living in households that shift from female-headed to two-adult headed are more likely to exit poverty than those who do not experience the shift. This impact is immediate—a shift last year (t-1) is not related to poverty exits this year (t). The likelihood of exiting poverty is higher by 12.4 percentage points if an individual experiences this event. In terms of employment transition events, the employment gain of a spouse is the most important, followed by another household member and then the household head. The likelihood of exiting poverty is higher by a total of 29.4 percentage points if the spouse gains employment, 15.0 percentage points if another household member gains employment, and 7.3 percentage points if the head gains employment.

 

Table 8—PSID Data:  Determinants of Individuals' Poverty Exit
Coefficient Estimates and Simulated Effects from Poverty Druation Hazard Model
Explanatory Variables All Poverty spell
of four or less years
Poverty spell
of more than four years
Exit Trigger Events (at t and lagged)
Change in Household Composition
Female-headed becomes two-adult household, t 0.632 0.662 0.352
  (0.325)* -0.61 -0.694
[0-1] [0.124] [0.089] [0.047]
Female-headed becomes two-adult household, t-1 -0.309 -0.523 -1.588
  -0.22 -0.585 (0.638)*
[0-1] [-0.056] [-0.073] [-0.119]
Change in Labor Supply
Gain of employment, head, t 0.379 0.571 0.732
  (0.110)** (0.206)** (0.264)**
[0-1] [0.073] [0.078] [0.105]
Gain of employment, head, t-1 -0.024 0.083 0.076
  -0.125 -0.225 -0.301
[0-1] [-0.004] [0.012] [0.009]
Gain of employment, spouse, t 1.082 0.709 1.28
  (0.144)** (0.250)** (0.440)**
[0-1] [0.217] [0.096] [0.209]
Gain of employment, spouse, t-1 0.397 0.194 0.71
  (0.178)* -0.346 -0.44
[0-1] [0.077] [0.027] [0.103]
Gain of employment, others in household, t 0.764 0.58 0.632
  (0.131)** (0.252)* (0.290)*
[0-1] [0.150] [0.079] [0.088]
Gain of employment, others in household, t-1 0.282 -0.015 1.013
  -0.158 -0.269 (0.370)**
[0-1] [0.054] [-0.002] [0.152]
Change in Disability Status
Head ceases to be disabled, t 0.087 0.129 0.072
  -0.105 -0.235 -0.272
[0-1] [0.016] [0.018] [0.009]
Head ceases to be disabled, t-1 -0.136 -0.120 -0.052
  -0.113 -0.238 -0.294
[0-1] [-0.025] [-0.017] [-0.006]
 Change in Education Status
Head graduated high school, t 0.583 1.605
  -0.386 (0.782)*
[0-1] [0.114] [0.185]
Head graduated high school, t-1 -0.429 -0.999
  -0.357 -0.557
[0-1] [-0.076] [-0.137]
Head education increase to high school, t or t-1, accompanied by household shift -0.302 -0.633
  -0.208 -0.411
[0-1] [-0.055] [-0.089]
Head received advanced degree (associates 0.375 0.605
degree or higher), t -0.575 -0.766
[0-1] [0.072] [0.089]
Head received advanced degree (associates 0.7 0.907
degree or higher), t-1 -0.522 -1.087
[0-1] [0.137] [0.117]
Head education increase beyond high school 0.256 -0.661
degree, t or t-1, but due to household shift -0.377 -0.649
[0-1] [0.049] [-0.092]
Change in Economic Status
Change in state unemployment rate, t 0.003 -0.058 -0.018
  -0.036 -0.074 -0.105
[0-0.5] [0.000] [-0.004] [-0.001]
Change in state unemployment rate, t-1 -0.015 -0.101 -0.163
  -0.035 -0.072 -0.102
[0-0.5] [-0.001] [-0.007] [-0.010]
Change in GDP, t (in billions) 0.001 -0.000 0.002
  0 -0.001 -0.001
[0-180] [0.026] [-0.004] [0.036]
Change in GDP, t-1 (in billions) 0.001 -0.001 -0.001
  0 -0.001 -0.001
[0-180] [0.020] [-0.032] [-0.016]
Demographic Characteristics of Household Head
Age:
Less than 25 -0.213 0.171 0.426
  (0.088)* -0.177 -0.274
[0-1] [-0.039] [0.024] [0.057]
Greater than or equal to 55 0.196 0.469 0.29
  (0.092)* (0.208)* -0.25
[0-1] [0.037] [0.065] [0.037]
Race:
Black -0.306 0.048 -0.262
  (0.074)** -0.155 -0.21
[0-1] [-0.058] [0.007] [-0.032]
Educational attainment:
Graduate high school two or more years ago 0.442 0.193 0.094
  (0.080)** -0.163 -0.248
[0-1] [0.084] [0.027] [0.012]
Received an associates degree or higher two or 0.596 0.045 0.268
more years ago (0.093)** -0.186 -0.29
[0-1] [0.116] [0.006] [0.035]
Household Composition
Female-headed household for two or more years -0.504 -0.415 -0.655
  (0.076)** (0.155)** (0.267)*
[0-1] [-0.096] [-0.059] [-0.084]
Single male-headed household -0.318 -0.082 -0.43
  (0.095)** -0.208 -0.322
[0-1] [-0.058] [-0.012] [-0.047]
Number of adults (less head and wife) 0.197 0.274 0.128
  (0.044)** (0.101)** -0.09
[0-1] [0.037] [0.038] [0.016]
Number of children (less children who enter at t and t-1) -0.231 -0.094 -0.18
  (0.029)** -0.058 (0.069)**
[0-1] [-0.046] [-0.013] [-0.025]
Geographic Characteristics
Region:
Northeast 0.061 0.064 0.038
  -0.103 -0.206 -0.329
[0-1] [0.011] [0.009] [0.005]
Midwest 0.022 -0.024 0.006
  -0.079 -0.167 -0.217
[0-1] [0.004] [-0.003] [0.001]
West 0.201 0.379 -0.075
  -0.116 -0.243 -0.447
[0-1] [0.038] [0.052] [-0.009]
Pacifica 0.039 4.845 --
  -0.746 (0.957)** --
[0-1] [0.007] [0.292] --
Urban area:
MSA 0.083 0.168 0.303
  -0.071 -0.145 -0.226
[0-1] [0.015] [0.024] [0.037]
Economic Characteristics
State unemployment rate, t -0.048 -0.115 -0.159
  (0.018)** (0.036)** (0.052)**
[0-0.5] [-0.005] [-0.007] [-0.016]
GDP, t (in ten billions) -0.026 -0.042 -0.077
  (0.011)* (0.021)* (0.031)*
[0-180] [-0.621] [0.569] [-0.920]
Spell Information, Non-Poverty
Observed duration
1 year -0.571 8.465
  (0.085)** (0.728)**
2 years -1.008 8.141
  (0.109)** (0.736)**
3 years -1.103 8.778
  (0.125)** (0.749)**
4 years -1.224
  (0.163)**
5 years -1.413
  (0.200)**
6 years -0.996   0.576
  (0.236)**   (0.287)*
7 years -1.016   0.45
  (0.241)**   -0.306
8 years -1.547   -0.107
  (0.264)**   -0.347
9 years or more years -1.656   0.051
  (0.172)**   -0.287
Other
Left-censored spell -0.239   -0.049
  (0.117)*   -0.218
Number of previous spells (observed) -0.14 -0.254 0.182
  (0.038)** (0.074)** -0.133
Year
1980-1989 0.209 0.605 -0.719
  -0.151 (0.298)* -0
1990-1996 0.632 1.373 --
  (0.278)* (0.533)* --
Sample size 35,445 9,039 7,534
Notes:
a) The variable for Pacific was dropped from the models in column 3 because too few people were identified as living in the Pacific region.
b) * denotes statistical significance at the 5 percent level; ** denotes statistical significance at the 1 percent level.
c) Standard errors are in parenthesis. The numbers in brackets are the simulated percentage point change in the likelihood of exiting poverty when the explanatory variable changes by the value indicated in the column labeled "Explanatory Variables" (typically from 0 to 1 [0-1]).

While individuals living with a household head who becomes disabled are more likely to enter poverty, individuals who live with a household head who ceases to be disabled are not more likely to exit poverty. We also examine whether a change in educational attainment is related to the probability of exiting poverty, but find no relationship.(50)

Many of the model’s control variables help to explain poverty exits. Characteristics of the head including his/her age, race, and educational attainment are related to poverty exits. Persons living in a household headed by individuals under age 25 are less likely to exit poverty than persons whose household head is age 25 to 54. Surprisingly, the results suggest that individuals who live in a household headed by an older person, over age 54, are more likely to exit poverty. This is counter to Stevens’ (1999) finding that persons over age 54 are less likely to exit poverty than those age 25 to 54. Our findings on race and educational attainment are, however, consistent with the literature. We find that persons living in households headed by black individuals are less likely to exit poverty than persons living in households headed by non-black individuals (Eller 1996, Naifeh 1998, and Stevens 1999). Like Stevens (1999), we find that higher educational attainment is associated with a higher probability of exiting poverty.

Household composition also plays a role in poverty exits. Persons in households that have been female-headed for two or more years, as well as persons in single male-headed households, are less likely to exit poverty than persons in two-adult households. The presence of dependent children in the household is also related to poverty exits—the likelihood of exiting poverty is lower for individuals in households with more children. We also find that individuals who live in metropolitan areas are more likely to exit poverty, which may be due to the fact that there tends to be more employment opportunities in metropolitan areas as compared to non-metropolitan and rural areas. The level of the state unemployment rate also matters, although GDP does not significantly affect poverty exits. Facing a high unemployment rate decreases the likelihood of exiting poverty.

We also find that the poverty spell information matters. Persons who have previously experienced a poverty spell are less likely to exit poverty than persons who are experiencing their first poverty spell. And, persons with long poverty spells are less likely to exit poverty than persons with short poverty spells.

Likelihood of Exiting Poverty if Event Occurs: As with the poverty entry models, coefficients from the multivariate analysis are used to calculate the overall likelihood of exiting poverty if an individual experiences a particular event (not shown in table).(51) First, recall from the descriptive analysis that the average likelihood of exiting poverty in a year is 35.8 percent. The multivariate results suggest that the likelihood of exiting poverty is above average for persons living in households with a gain in employment (of the head, spouse, or others) and those living in households that shift from female-headed to two-adult headed. The likelihood of exiting poverty in a year is 65.2 percent if the spouse gains employment, 50.8 percent if another household member gains employment, and 43.1 percent if the head gains employment—significantly higher than the average exit likelihood of 35.8 percent. For persons living in a household that shifts from female-headed to two-adult headed, the likelihood of exiting poverty in a year is 48.2 percent. Individuals in a household where the head increases his/her educational attainment or ceases to be disabled are no more or less likely to exit poverty than those individuals who do not experienced the event.

Short and Long Poverty Spells: Next, we examine whether the exit trigger events differentially affect individuals exiting “long” versus “short” poverty spells. We again define a short poverty spell as one that lasts four or less years and a long spell as one that lasts five or more years. As mentioned in the discussion of poverty entries, some poverty spells cannot be identified as short or long because the full spell is not observed. If the beginning or the end of a one to four year spell is not observed (i.e., the spell is left censored—the beginning of the spell is not observed, or right censored—the end of the spell is not observed), the spell is not categorized as either long or short. The true length of these censored poverty spells could be more than four years, so they are omitted. This categorization and elimination of censored spells results in 9,039 person-year observations in the analysis of short poverty spells and 7,534 person-year observations in the analysis of long poverty spells.

Like the model estimated on the full sample, the short and long poverty spell results suggest that poverty exits are more strongly related to employment gains than shifts in household structure. In fact, individuals in households that shift from female-headed to two-adult headed are no more likely than their counterparts who did not experience the event to exit a short poverty spell (Table 6, column 2). Further, this household structure shift is negatively related to the likelihood of exiting long poverty spells, an unanticipated sign (Table 6, column 3).

Employment gains by the household head, spouse, and other household members are associated with higher probabilities of exiting poverty for both groups, although more important for persons exiting long versus short poverty spells. For example, the probability of exiting poverty if the spouse gains employment is higher by 20.9 percentage points for individuals exiting long poverty spells but is higher by only 9.6 percentage points for individuals exiting short poverty spells.

Like the model estimated on the full sample, living with a household head who ceases to be disabled is not related to exits from long or short poverty spells. In terms of educational gains, individuals in households where the head completed high school are more likely to exit a short poverty spell—their probability of exiting poverty increases by a total of 18.4 percentage points. We do not include changes in educational attainment in our examination of exits from long poverty spells because very few household heads in the midst of a long poverty spell had a change in educational attainment. Finally, we find that neither economic change variable—change in unemployment or GDP—affects exits from short or long poverty spells.

SIPP: Again, individuals experiencing many of our trigger events are substantially more likely to exit poverty. This SIPP analysis shows the importance of employment gains in individuals' exits from poverty, but employment gains do not dominate the other events in the SIPP analysis as they do in the PSID analysis. So, while the SIPP results are similar to the PSID, there are differences. When comparing the SIPP and PSID results, it is important to keep in mind that the SIPP analysis examines monthly poverty exits and the PSID examines yearly poverty exits. Results from the 1996 SIPP panel analysis are presented first, and then are compared with findings from 1988/1990 SIPP panels.

The 1996 SIPP results suggest that employment gains are most often associated with exits from poverty. This, however, is not followed by shifts from female-headed to two-adult households as in the PSID analysis. Instead, we find that increases in educational attainment—completing a high school or higher-level degree—is the next most important event, followed then by shifts in household structure, and then changes in disability status.

Employment gains by the head, spouse, and other household members are of roughly equal importance in helping individuals exit poverty. The likelihood of exiting poverty in a month is higher by a total of 28.3 percentage points if the head gains employment, 28.4 percentage points if the spouse gains employment, and 29.6 percentage points if another household member gains employment (Table 9, column 2).(52, 53) Increases in educational attainment have a similarly large impact on the likelihood of exiting poverty. An individual’s likelihood of exiting poverty is higher by a total of 27.0 percentage points if the household head receives an advanced degree (associate’s degree or higher). If the household head receives a high school degree, the likelihood of exiting poverty is higher by a smaller, yet substantial 7.4 percentage points. This increased likelihood of exiting poverty upon completing a schooling degree may be due to the higher wages individuals generally command with higher levels of education, as well as increased hours of work which may coincide with the completion of school. The PSID analysis finds no statistically significant relationship between changes in educational attainment and poverty exits for the full sample (Table 8, column 1), but the results do suggest that completing a high school degree increases the likelihood of exiting a short poverty spell by 18.4 percentage points (Table 8, column 2). Identifying a relationship between school completion and poverty exits may be easier with the monthly SIPP data than the annual PSID. If individuals tend to complete school in the middle of the year (say, May or June), then the effect of completing school may get clouded in the annual PSID measure, but would not be clouded in the monthly SIPP data.

 

Table 9—SIPP Data: Determinants of Individuals' Poverty Exit
Coefficient Estimates and Simulated Effects from Poverty Duration Hazard Model
Explanatory Variables 1988 & 1990 Panels 1996 Panel
Exit Trigger Events (at t and lagged)
Change in Household Composition
Female-headed becomes two-adult household, t 2.295 0.847
  (0.259)** (0.173)**
[0-1] [0.351] [0.078]
Female-headed becomes two-adult household, t-1 -0.652 -0.121
  (0.256)* -0.196
[0-1] [-0.046] [-0.008]
Female-headed becomes two-adult household, t-2 -0.868 -0.051
  (0.312)** -0.217
[0-1] [-0.056] [-0.004]
Female-headed becomes two-adult household, t-3 -0.057 0.244
  -0.289 -0.197
[0-1] [-0.005] [0.019]
Female-headed becomes two-adult household, t-4 0.045 -0.496
  -0.272 (0.184)**
[0-1] [0.004] [-0.030]
Change in Labor Supply
Gain of employment, head, t 1.120 1.818
  (0.090)** (0.043)**
[0-1] [0.135] [0.214]
Gain of employment, head, t-1 0.47 0.734
  (0.082)** (0.047)**
[0-1] [0.047] [0.064]
Gain of employment, head, t-2 0.195 0.225
  -0.103 (0.055)**
[0-1] [0.018] [0.017]
Gain of employment, head, t-3 0.031 -0.183
  -0.094 (0.062)**
[0-1] [0.003] [-0.012]
Gain of employment, head, t-4 -0.211 -0.03
  -0.135 -0.059
[0-1] [-0.017] [-0.002]
Gain of employment, spouse, t 1.231 1.93
  (0.112)** (0.072)**
[0-1] [0.153] [0.235]
Gain of employment, spouse, t-1 0.367 0.584
  (0.095)** (0.079)**
[0-1] [0.036] [0.049]
Gain of employment, spouse, t-2 0.133 -0.091
  -0.11 -0.088
[0-1] [0.012] [-0.006]
Gain of employment, spouse, t-3 -0.035 0.149
  -0.121 -0.081
[0-1] [-0.003] [0.011]
Gain of employment, spouse, t-4 -0.044 0.079
  -0.141 -0.081
[0-1] [-0.004] [0.006]
Gain of employment, others in household, t 1.531 1.965
  (0.090)** (0.061)**
[0-1] [0.204] [0.240]
Gain of employment, others in household, t-1 0.212 0.655
  (0.086)* (0.061)**
[0-1] [0.020] [0.056]
Gain of employment, others in household, t-2 -0.032 0.086
  -0.090 -0.066
[0-1] [-0.003] [0.006]
Gain of employment, others in household, t-3 0.045 -0.092
  -0.09 -0.064
[0-1] [0.004] [-0.006]
Gain of employment, others in household, t-4 -0.058 -0.113
  -0.132 -0.066
[0-1] [-0.005] [-0.008]
Change in Disability Status
Head ceases to be disabled, t 0.281 0.785
  -0.168 (0.094)**
[0-1] [0.027] [0.071]
Head ceases to be disabled, t-1 -0.632 -0.62
  (0.137)** (0.087)**
[0-1] [-0.045] [-0.036]
Head ceases to be disabled, t-2 -0.343 -0.04
  (0.157)* -0.072
[0-1] [-0.027] [-0.003]
Head ceases to be disabled, t-3 -0.154 -0.023
  -0.19 -0.074
[0-1] [-0.013] [-0.002]
Head ceases to be disabled, t-4 0.119 -0.117
  -0.189 -0.081
[0-1] [0.011] [-0.008]
Change in Education
Head graduated high school, t 0.872 0.814
  (0.237)** (0.195)**
[0-1] [0.099] [0.074]
Head graduated high school, t-1 -0.444 -0.160
  -0.238 -0.202
[0-1] [-0.033] [-0.011]
Head graduated high school, t-2 0.229 0.282
  -0.202 -0.185
[0-1] [0.021] [0.022]
Head graduated high school, t-3 0.284 -0.234
  -0.224 -0.211
[0-1] [0.027] [-0.015]
Head graduated high school, t-4 -0.086 -0.176
  -0.296 -0.211
[0-1] [-0.007] [-0.012]
Head education increase to high school, t to t-4, accompanied by household shift -0.031 -0.03
  -0.158 -0.105
[0-1] [-0.003] [-0.002]
Head received advanced degree (associates degree or higher), t 1.069 1.057
  (0.281)** (0.260)**
[0-1] [0.128] [0.104]
Head received advanced degree (associates degree or higher), t-1 0.273 -0.011
  -0.256 -0.224
[0-1] [0.026] [-0.001]
Head received advanced degree (associates degree or higher), t-2 0.672 0.459
  (0.310)* (0.206)*
[0-1] [0.072] [0.038]
Head received advanced degree (associates degree or higher), t-3 0.217 0.786
  -0.308 (0.194)**
[0-1] [0.020] [0.071]
Head received advanced degree (associates degree or higher), t-4 0.326 0.659
  -0.338 (0.215)**
[0-1] [0.031] [0.057]
Head education increase beyond high school degree, t to t-4, but due to household shift 0.394 0.076
  -0.245 -0.11
[0-1] [0.039] [0.006]
Change in Economic Status
Change in state unemployment rate, t 0.077 0.038
  (0.030)* -0.027
[0-0.5] [0.003] [0.001]
Change in state unemployment rate, t-1 -0.047 0.008
  -0.038 -0.029
[0-0.5] [-0.002] [0.000]
Change in state unemployment rate, t-2 -0.109 0.022
  (0.046)* -0.029
[0-0.5] [-0.005] [0.001]
Change in state unemployment rate, t-3 -0.068 0.015
  -0.046 -0.028
[0-0.5] [-0.003] [0.001]
Change in GDP, t (in billions) 0.001 0
  (0.000)* (0.000)**
[0-180] [0.014] [-0.005]
Change in GDP, t-1 (in billions) 0.005 0.001
  (0.001)** (0.000)**
[0-180] [0.107] [0.008]
Change in GDP, t-2 (in billions) 0 -0.001
  -0.001 (0.000)**
[0-180] [-0.007] [-0.007]
Change in GDP, t-3 (in billions) -0.002 -0.001
  (0.001)** (0.000)**
[0-180] [-0.029] [-0.009]
Demographic Characteristics of Household Head
Age:
Less than 25 -0.197 -0.260
  (0.056)** (0.039)**
[0-1] [-0.016] [-0.017]
Greater than or equal to 55 -0.142 -0.107
  (0.046)** (0.028)**
[0-1] [-0.012] [-0.007]
Race:
Hispanic -0.214 -0.100
  (0.051)** (0.035)**
[0-1] [-0.014] [-0.007]
Black -0.463 -0.196
  (0.053)** (0.031)**
[0-1] [-0.037] [-0.013]
Educational attainment:
Graduate high school more than one year ago 0.384 0.212
  (0.067)** (0.029)**
[0-1] [0.035] [0.015]
Received an associates degree more than one year ago 0.485 0.373
  (0.070)** (0.029)**
[0-1] [0.046] [0.028]
Household Composition
Female-headed household for two or more years -0.393 -0.274
  (0.062)** (0.028)**
[0-1] [-0.032] [-0.019]
Number of adults (less head and wife) 0.304 0.152
  (0.026)** (0.018)**
[0-1] [0.026] [0.011]
Number of children (less children who enter at t and t-1) -0.052 -0.069
  (0.017)** (0.009)**
[0-1] [-0.005] [-0.005]
Geographic Characteristics
Region:
Northeast -0.132 0.049
  (0.053)* -0.032
[0-1] [-0.011] [0.004]
Midwest -0.081 -0.029
  -0.047 -0.03
[0-1] [-0.007] [-0.002]
West 0.030 0.079
  -0.049 (0.034)**
[0-1] [0.003] [0.006]
Urban area:
MSA 0.039 0.04
  -0.039 -0.026
[0-1] [0.003] [0.003]
Economic Characteristics
State unemployment rate, t -0.085 -0.06
  (0.013)** (0.013)**
[0-0.5] [-0.005] [-0.003]
GDP, t (in ten billions) -0.117 -0.015
  (0.024)** -0.012
[0-180] [-0.990] [-0.195]
Spell Information, Non-Poverty
Observed duration
0 months -0.592 -7.005
  (0.049)** (0.474)**
4-6 months -0.717 -0.809
  (0.057)** (0.034)**
7-9 months -0.713 -0.662
  (0.062)** (0.041)**
10-12 months -1.032 -0.881
  (0.092)** (0.048)**
13-15 months -1.733 -1.071
  (0.126)** (0.057)**
16-18 months -1.835 -1.687
  (0.139)** (0.079)**
19-21 months -1.662 -1.307
  (0.132)** (0.080)**
22-24 months -1.638 -1.329
  (0.179)** (0.091)**
25-27 months -1.507 -1.271
  (0.212)** (0.095)**
28 or more months -1.993 -1.632
  (0.496)** (0.071)**
Other
Left-censored spell -0.54 -0.647
  (0.050)** (0.034)**
Number of previous spells (observed) 0.071 -0.14
  (0.025)** (0.019)**
Year
1990 Panel -0.555
  (0.073)**
1997 0.184
  (0.058)**
1998 0.271
  (0.091)**
1999 0.289
  (0.130)*
Sample size 272,639 517,902
Notes:
a) The variable for Pacific was dropped from the models in columns 2 and 3 because too few people were identified as living in the Pacific region.
b) * denotes statistical significance at the 5 percent level; ** denotes statistical significance at the 1 percent level.
c) Standard errors are in parenthesis. The numbers in brackets are the simulated percentage point change in the likelihood of exiting poverty when the explanatory variable changes by the value indicated in the column labeled "Explanatory Variables" (typically from 0 to 1 [0-1]).

A shift in household structure, from a female-headed to a two-adult headed household, has the next largest effect, although this effect is considerably smaller—the likelihood of exiting poverty in a month is higher by only 4.8 percentage points. Findings with PSID data suggest that the likelihood of exiting poverty in a year is higher by 12.4 percentage points if the individual experiences this household shift. Individuals living in households whose head ceases to be disabled are also more likely to exit poverty (by 3.5 percentage points). We found no relationship between this event and poverty exits with the PSID data, although once again, it may be more difficult to pick up this relationship with the annual PSID data as compared to the monthly SIPP data. The final events examined are changes in economic conditions. The results suggest that changes in the state unemployment rate do not affect the likelihood of exiting poverty, but that higher state unemployment rates (i.e., the level variable, not the change variable) lower the likelihood of exiting poverty.(21) We also find that an increase in GDP reduces the likelihood of exiting poverty, an unanticipated sign.

Changes Over Time: Similar to the SIPP poverty entry models, a comparison of the 1988/1990 and 1996 SIPP panel results show some differences. The results suggest that over the 1988-92 (i.e., 1988/1990 SIPP panel) to 1996-99 (i.e., 1996 SIPP panel) time period, shifts from female-headed to two-adult headed households—measured while controlling for shifts in employment—became less important in individuals' poverty exits. With a shift from a female-headed to a two-adult household, an individual’s likelihood of exiting poverty in the 1988-92 period increased by 24.9 percentage points (Table 9, column 1),(22) whereas in the 1996-99 period it only increased by 4.8 percentage points (Table 9, column 2). Because changes in household structure are often associated with changes in employment, we estimated a second set of models that exclude employment changes (not shown). The results from these models show a similar relationship between poverty exits and household structure shifts in the 1988-92 and 1996-99 periods. One possible explanation for this pattern is that in the latter period changes in household structure are operating indirectly through employment to a greater extent than in the earlier period. Our analysis also suggests that employment gains became more important in individuals' poverty exits over this time period. An employment gain by someone in the household increased the likelihood of exiting poverty by 18 to 22 percentage points in the 1988-92 period, while the same employment gain increased the likelihood of exiting poverty by roughly 28 percentage points in the 1996-99 period.

The results suggest that the effect of increases in educational attainment are similar across the two periods, and receiving an advanced degree (associate’s degree or higher) is more important than receiving a high school degree. The relationship between economic conditions and poverty exits differs somewhat between the two time periods, although individuals who live in states with high unemployment rates are less likely to exit poverty in both periods. Unlike the 1996-99 period, changes in economic conditions are found to affect poverty exits in the 1988-92 period. The 1988-92 SIPP results suggest that increases in the unemployment rate reduced poverty exits and that increases in GDP increased poverty exits, both are the anticipated sign. The results suggest that an increase in the state unemployment rate by 0.5 percentage points decreases the likelihood of exiting poverty by 0.4 percentage points, and an increase in GDP of $180 billion (the average change in GDP across the 1975-96 period) increases the likelihood of exiting poverty by 9.2 percentage points.

Many of the control variables that are statistically significant in the PSID analysis are also significant in the SIPP analysis. As with the poverty entry models, one difference is the relationship between age and poverty exits. In both SIPP analyses, we find that individuals in households headed by young adults (under age 25) and older adults (age 55 and or older) are less likely to exit poverty, but in the PSID we find that individuals in households headed by older adults are more likely to exit poverty. The race and educational attainment of the household are important. Persons in households headed by black and Hispanic individuals are less likely to exit poverty than persons in households headed by whites and other minority groups. Persons who live in households headed by individuals with higher educational attainment are more likely to exit poverty.

Like our PSID findings, we find that household structure also plays a role in poverty exits in the SIPP analyses. Persons in households that have been female-headed for two or more years are less likely to exit poverty than persons in two-adult and single male-headed households. The number of adults in the household and the presence of dependent children in the household are also related to poverty exits—the likelihood of exiting poverty is lower for individuals in households with more adults and fewer children. Again, we find that the duration of the poverty spell matters. As individuals' poverty spells get longer, they are less likely to exit poverty.

Likelihood of Exiting Poverty if Event Occurs: Again, the coefficients from the multivariate models are used to calculate the overall likelihood of exiting poverty if an individual experiences a particular event (not shown in table).(56) In comparing results from the SIPP and PSID, we find that many more of the trigger events are significantly related to poverty exits in the monthly SIPP analysis as compared to the annual PSID analysis. While we did not find this in the poverty entry models, this finding is not particularly surprising. Ruggles and Williams (1987) point out that associating an annual change in poverty status with an event that occurs at some point during the year (i.e., what is done in the PSID analysis) is more difficult than identifying a relationship between poverty status changes and events when the timing is more precisely identified (i.e., what is done with the monthly SIPP analysis) (pp. 1-2). The multivariate PSID results suggest that the likelihood of exiting poverty is above average for persons living in households with a gain in employment (of the head, spouse, or others) and those living in households that shift from female-headed to two-adult headed. In analyses with SIPP data, these trigger events plus changes in disability status, educational attainment, and economic conditions are important.

The average likelihood of exiting poverty in a month is 10.9 percent in the 1988-92 SIPP period and 9.1 percent in the 1996-99 SIPP period. In the 1996-99 period, employment gains are most likely to lead to a poverty exit. The likelihood of exiting poverty in a month is 37.4 percent if the head gains employment, 37.5 percent if the spouse gains employment, and 38.7 percent if another family member gains employment—significantly higher than the average exit likelihood of 9.1 percent. In the 1988-92 period, these likelihoods are similar, but slightly lower: 29.1 percent, 29.8 percent, and 33.3 percent, respectively. Increases in educational attainment also play an important role in poverty exits. The likelihood of exiting poverty when the household head receives an advanced degree is between 31 and 36 percent, close in magnitude to the employment gain likelihoods. The likelihood of exiting poverty if the household shifts from female-headed to two-adult headed is 35.8 percent in the 1988-92 period, while it is 13.9 percent in the 1996-99 period.(57) This is similar to 1996-99 likelihood of exiting poverty if the individual is living in a household where the head ceased to be disabled, 12.6 percent.

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