Understanding Changes in Child Poverty Over the Past Decade

Assessing the New Federalism Discussion Paper No. 06-02

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Over the past ten years, there have been two sharply different trends in child poverty in the United States: a major reduction from 1993 to 2000 and an increase from 2000 to 2004. Both trends have been even more marked for black children. This period of ten years with two sharp changes in child poverty offers an unusual opportunity to tease out the reasons for trends in child poverty. Exploring these reasons in turn is of potentially great importance to policy, as well as to the well-being of children. Among the very different reasons that have been suggested for these changes are changes in federal and state policy, changes in federal and state macroeconomic conditions, and changes in family characteristics and behavior, such as family structure and education.

In order to explore the question of why child poverty rates have changed dramatically twice in ten years, the paper looks at three related questions first. First, to lay the groundwork for understanding the differences among groups of children (in particular, between black and white children) and to check the basic framework for explaining child poverty, the paper looks at differences in poverty rates among subgroups at a single point in time. These differences are likely an upper bound on the explanatory power of these factors,¹ and it would be implaus ible if factors identified as sources of changes in child poverty were not also associated with child poverty at a point in time. Second, drawing on the understanding of relevant variables gained from the cross-sectional analysis, the paper looks at the trends in these variables over time. Which of them have the potential to explain the sharp turns in the poverty rate, for example, because they changed in the appropriate direction at about the right time? Third, the paper looks at long-term explanations for changes in child poverty. And finally, it zeroes in on the past ten years and the two sharp changes in the child poverty rate, to see what accounts for those specific movements.

Notes from this section of the report

1 The cross-sectional difference is like an upper bound because observable characteristics of families, such as work status, are likely correlated with important unobservable characteristics. For example, if 10 percent of children in high-work families are poor, and 60 percent of other children are poor, then an increase of 10 percentage points in the proportion of children in high-work families will likely not reduce child poverty by as much as 5 percentage points. In this case, the families joining the high-work group would likely have been poor in smaller proportion than other non-high-work families.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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