Dipartimento di Economia e Diritto

Seminario: Aula del Consiglio - February 15, 2022 – 5 pm (Online streaming: meet.google.com/vsu-boeg-pye)

Inequality Below the Poverty Line Since 1967: The Role of U.S. Welfare Policy

Zach Parolin (Columbia University) Matthew Desmond (Princeton University) Christopher Wimer (Columbia University)

Abstract Since the War on Poverty in the 1960s, the U.S. social safety net has shifted away from direct cash assistance for the lowest-income families and toward tax-based transfers targeted at working families with children. Previous research has assessed this shift by evaluating its effect on the national poverty rate. Doing so, however, overlooks how it may also have led to increased inequality among lowincome families. We apply a decomposition framework to measure how changes in taxes/transfers and composition have affected trends in inequality below the poverty line from 1967 to 2019. Income inequality among the poorest families has been volatile since the 1960s, and changes to the American welfare state played a decisive role in expanding or reducing inequality below the poverty line. Taxes and transfers have increased between-group inequalities below the poverty line across family type and employment status, but have reduced inequalities across race/ethnicity and geography. After the mid-1990s, the policies that most reduced poverty were also those that most increased inequality among the poor; this was not true in prior decades. This counterintuitive finding challenges standard theories regarding the effectiveness of income transfers in reducing poverty by revealing that recent stateled antipoverty efforts have placed the near poor and the deeply poor on divergent paths.