Technical Bulletin No. (TB-1889) 36 pp

February 2001

Poverty, Policy, and the Macroeconomy

This report is an empirical inquiry into how poverty is changed by the macroeconomy. The analysis suggests low real wage rates and not the unemployment rate are the most important determinant of poverty in the long run. Changes in output and unemployment primarily affect cyclical or shortrun poverty. The empirical results weaken the belief that output growth acting alone will significantly and permanently reduce poverty in the United States. Instead, the results suggest combining economic growth strategies with targeted interventions that may lie outside the traditional sphere of monetary and fiscal policy.

Keywords: Poverty, unemployment, wages, economic growth

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