international poverty comparisons

Jared Bernstein, with the following chart, illustrates a fact that I was not fully aware of. The United States is an outlier among advanced countries for its poverty rate after taxes and transfers, but not for its poverty rate before taxes and transfers. This has important implications for understanding the causes of poverty. 

Source: OECD, *Poverty thresholds: 50% of median income.

 

The American debate on the causes of poverty places significant weight on the behavior of the poor, behavior that’s juiced up—in a bad way—by safety net programs.  For example, the argument goes, anti-poverty programs that provide cash or nutritional (near-cash) benefits to poor peeps leads them to work less and thus leads to higher poverty rates than would otherwise prevail.

I think the international evidence is instructive ….

Though there is variation across countries on the pre-transfer, or market poverty rates, they’re fairly close, and their average, excluding the US, happens to be the same as ours.  After the tax and transfer system kicks in, however, the US has the highest poverty rate of all the countries in the sample. ….

That suggests that what determines poverty differences across countries may not have much to do with the poor themselves or the disincentive effects of the safety net.  And what determines the post-tax and transfer rates are of course, the taxes and transfers.

Jared Bernstein, “International Poverty Comparisons: What Do They Tell Us about Causes?“, On the Economy, 8 September 2012.

Jared Bernstein is Senior Fellow at the Center on Budget and Policy Priorities, a Washington-based think tank.  From 2009 to 2011, he was the Chief Economist and Economic Adviser to Vice President Joe Biden.

HT Mark Thoma

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