MEASURING THE AMERICAN DREAM.

MEASURING THE AMERICAN DREAM. Kids, in reading articles about income distribution you have to pay attention to measurement problems. The word “poverty” is ambiguous. Sometimes it refers to relative poverty and sometimes to absolute poverty. I think that in the article I linked to today, Professor Krugman is talking about relative poverty rather than absolute poverty. The estimate he uses, which apparently is based apparently on following a sample of parents and children, avoids one of the frustrations of comparisons of income distribution. Over a period of a generation, immigration, presumably from poorer countries, causes measurement problems. Simple comparisons of the lowest 25% thirty years apart run into the problem that after thirty years, many of the lowest quartile will include immigrants who lived in poverty in other countries, for whom we don’t have any information. Presumably a majority of these immigrants are better off than they had been, even if they are now in the bottom quartile in the United States. Following individuals doesn’t avoid measurement problems entirely, however, because new immigrants from poorer countries would make it easier for the second generation in the study to escape the bottom quartile.