Livable Lives Thriving Communities Working Paper

Estimating the Life Course Dynamics of Asset Poverty

Poverty can be conceptualized and measured in several different ways. The most common approach has been to rely on a scarcity of income as the basis for poverty. This paper analyzes poverty using a relatively new and alternative measuring stick – that of asset poverty. Using data from the Panel Study of Income Dynamics, we examine the extent to which individuals have enough assets to allow them to live for three months above the official poverty line. Households that fail to have the necessary amount of assets are considered asset poor. Three different measures of counting assets are used in this paper – net worth; financial wealth; and liquid wealth. We construct a series of life tables that allow us to examine the period, cohort, and age patterns of asset poverty from 1984 to 2004. Our results indicate that asset poverty is widespread across the life course. The vast majority of those in early adulthood will experience asset poverty in terms of their net worth, financial wealth, and liquid wealth. For those in the middle and later stages of the life course, there remains a substantial risk of encountering financial wealth and liquid wealth asset poverty. In addition, individuals who have less education, are not married, are black, and who do not own a home, are all significantly more likely to experience asset poverty. The policy implications of these findings are discussed.

Citation

Rank, M. R., & Hirschl, T. A. (2010). Estimating the life course dynamics of asset poverty (CSD Working Paper No. 10-25). St. Louis, MO: Washington University, Center for Social Development.