lecture3_Sept12_slides (1)

lecture3_Sept12_slides (1) - Supplemental Poverty Measure...

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September 12, 2011 Supplemental Poverty Measure  (Continued) 1
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SPM proposed poverty measure: Equivalence  Scales n SPM recommended an equivalence scale of:   § Single Individual:1.00 § Childless couple: 1.41 § Two-parent families:  (A + p*K)F A=# of adults K=# kids p= child consumption as a proportion of adult consumption  F=Scale factor (0 TO 1) n Example:  p=0.50, F=0.7, threshold for family of 2  adults and 2 kids = $25,000.  What is the threshold  for a family with 2 adult and 1 kid?
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threshold the is ] [ ) 2 2 ( ) ( 2 , 2 , T p pK A T F F K A + + =
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SPM proposed poverty measure: Resources n Family resources = cash income  § MINUS: Tax payments, child-care and other work  expenses, child support payments, out-of-pocket  medical expenses § PLUS: EITC and other tax credits, in-kind government  transfers (Food Stamps, School Lunches, Housing  Subsidies, Utility Assistance) n Note the treatment of medical expenses/health  insurance § Spending on medical needs is NOT part of the essential  budget but is also not part of income § Health Insurance is not counted as a resource
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What Difference Does the SPM Measure  Make? n The SPM measure will reflect how poverty changes  as: 1. Economic growth increases cash income 2. Family structure changes 3. Tax policy and in-kind benefits change* 4. Changes in work behavior influence work expenses* 5. Health care sector changes* 6. Regional cost-of-living changes* * = not true about current measure
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Source: Short, Kathleen (2011) “
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This note was uploaded on 02/03/2012 for the course ECON 375 taught by Professor Staff during the Fall '10 term at Maryland.

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lecture3_Sept12_slides (1) - Supplemental Poverty Measure...

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