Paper: Stevens (2012)

Technically a handbook chapter.

## 3. Econometric Issues in Poverty Transition Models (p. 4-8)

* Definition of poverty: absolute v. relative, pre- v. post-tax income, inclusion of in-kind benefits or not. These issues received attention but not so much in studies of poverty transitions
* Both Markov and hazard models have been used. Hazard models more naturally accommodate duration-dependence.
* Duration seems to matter, hence left-censored spells pose an econometric challenge.
* Finally, the issue of how multiple spells for an individual are linked has not been thoroughly studied.

## 4. Poverty Transition in the US: 1968-2003 (p.8-30)

### 4.1 PSID Data

* Advantages: (1) ongoing since 1968 so long sample, (2) can study transitions over life and even across generations because it tracks families and their offspring, and (3) it collects a rich set of data on income, its components, and demographic events.
* Disadvantages: (1) from 1997, the PSID moved from yearly interview to every other year, (2) did not include immigrants in the 1968 sample, with an "immigrant refresher sample" added only in 1997, (3) the low-income oversample portion was dramatically reduced [INSERT CHANGE IN SIZE] in size in 1997 leading to many right-censored spells in 1997 (even though sample weights were adjusted).
* Stevens suggests that it might be best to view the PSID as two samples---one running 1968-1997 and another biennial sample from 1997-present.
* Sample for this paper's analysis:
	+ All individuals associated with an original 1968 PSID family, this includes original sample members and members of households who split off from an original PSID family and form their own households.
	+ 1968-2003 data years
* d

### 4.2 Spells (p. 9-14)

Estimate distribution of completed spells (so completed duration of spell) for 1-7 years for: (1) Not-left-censored/new spells 1968-2003, (2) Not-left-censored/new spells 1975-2003, (3) all spells 1968-2003, (4) all spells 1975-2003, but observing previous 7 years of poverty status. Shows the extent of bias introduced by left-censoring. Does this both for poverty spells and not-poor spells.

### 4.3 Transitions (p. 14-20)

Describes events associated with transitions (e.g. types of household changes, earnings changes, etc.)

## 5. Conclusions (p. 30-31)

* Makes a very interesting point: empirical work has not yet developed a link between flows in and out of poverty and the stock of poor individuals at a point in time. The literature on welfare and unemployment spells has taken this approach.
* Two technical issues in transition models merit more attention: (1) that left-censored spells need to be included to avoid bias, and additional work on how best to do this would be valuable, and (2) modeling connections between spells and when this can matter for persistence estimates.
* Finally, the sensitivity to estimates to alternative poverty definitions has been understudied.

## Footnotes

1. ↑ "The PSID has attempted to collect family income information during the "off-years" (...) The difficulty is that these off-year income measures are not strictly comparable with other year income measures. Both the method for collecting the data and the recall period for respondents differ. Andreski and colleagues (2008) note that “the t-2 income from the 1997–2007 data waves is to be used with caution and is not to be com­bined naively with income reports from t-1.”"
2. ↑ I think is this less of a problem because we can deal with right-censored spells quite well econometrically as done in B&E (1986)? Just exclude them in the calculation of exit probabilities in the last year.
3. ↑ What do they do in the literatures on welfare and unemployment spells?