2. More on Poverty

3. Analysis of Income Transfers Leisure time/week Earnings/week 168148 120 Suppose you give $200 200 Original Budget Line Work

4. Analysis of Income Transfers What happens in theory? –Transfers of this type discourage work effort. –Is this always bad? What happens in practice? –Transfers of this type discourage work effort. Recipients have relatively low wages Above very small wage levels, income transfers often reduce earned income $ for $.

5. Negative Income Tax With no grant, household earns $6/hour As worker works, she pays off grant. What are work effort effects? Income, $ 200 300 Labor hours 1020304050 Mkt income@ w = 6 Grant w/ mgl tax rate = 0.66 Total Income

6. Negative Income Tax Leisure time/week Earnings/week 168148 120 Suppose you give $200 200 Original Budget Line Work Tax at 66% Lower Tax Rate

7. Analysis For people who aren’t working, it encourages work. For those who are working, it discourages work, particularly if the tax rate is very high. Political problems -- people who are being taxed to pay for these programs don’t want recipients to be better off than they are.

8. In-kind transfers What would you like, $100 for food, or $X that you could spend any way you want? Food Other Goods A B C

9. Central City Poverty Do you disperse it? –Will it give us integration, or just move the segregation? –Will the upper class role models move out? –Will it disperse Black culture, Black political power? –If spatial mismatch isn’t valid, is dispersion good policy?

10. Central City Poverty Do you develop it away –Is central city a viable location for firms? –Will central city employment gains come at expense of employment elsewhere? –Central city skill mix? –Will central city development benefit central city residents?

11. The Homeless Definition – Someone who sleeps –Outside –In places not intended for sleeping –In housing shelters Consensus estimate = about 250,000 – 300,000 on any given night.

12. Who?

13. Why? – Look at Elasticities Rent for low-quality housing –Elas = 1.25 Employment growth rate –Elas = -0.15 Size of welfare payment – Elas = -1.54 Institutionalization of mentally ill –Elas = -0.32 City size – Elas = 0.22

14. Why is it Bad for the Homeless O’Flaherty has looked at this. They are not secure in their persons or their possessions. Many are subject to excess morbidity and premature mortality. They are often not well-nourished. They are often prevented from appearing in public w/o shame or from taking part in the general life of the community. Homelessness is a problem for the homeless, whether they think so or not.