Monday, February 15, 2010

Growing poverty rate for Ill. children

Chicago Tribune article "Growing poverty rate for Ill. children" (February 11th, 2010) speaks on high child poverty rates in Illinois without asking why that might be the case. Corrections suggests that the reason a place like Illinois might have many individuals below the poverty line is because they do good things for the poor, rather than neglect them.

"Now is not the time to pull back on ensuring that our children have the basic education and health care they need to develop to their full potential," Ryg said.

This may "exacerbate" Illinois's problem. Corrections suggests, as Ed Glazer and Josh Gottlieb did in their NBER Working Paper "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium," (2009), that the reason cities might have many poor people is because they are good places for poor people to be, not bad, as one might intuitively suggest. The reasoning is simple: poor people move to places where they can get the most assistance, the best living standards.

Imagine a world in which there are four cities. One large one and several small. Before time t, the large city and smaller cities have the same poverty programs. At time t, the large city enacts a welfare program to help the poor. The poor from other cities will move to the large city, and the impact of welfare by a city may be to increase the number of poor while perhaps decreasing the total number of poor people. The increase comes from having more poor people move to the city than the program eradicates.

Three 3-D graphics, where the x and y axes are spatial coordinates of cities, and the z axis is level of poverty, are displayed. The center city is the city that enacts the welfare program.The first diagram represents poverty levels in the cities before the welfare program was enacted (click to enlarge).

The second diagram represents poverty levels in the cities after the welfare program was enacted (click to enlarge). Note the z-axis increases slightly, which hides the increase in the central city (but displays more prominently the decrease in outside cities.

The third diagram represents the difference in poverty rates (click to enlarge). The poverty program reduced total poverty, but the gain was seen by the outer cities.

Corrections concludes that local, city, or state poverty levels tell us little about whether or not the poor are better off in a location. Indeed, our modeling suggests that areas with more poor people are perhaps doing more for the poor--that is why they are there. Finally, and as a side note, Corrections could forego the above exercise and note that applying the Law of Demand indicates that good welfare programs encourage high poverty rates. (Though we note they also have a direct effect).

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