accounting period. The objection to short-term measures is that they may overstate poverty by counting as poor people who can defer expenditures or draw on resources acquired in an earlier period to tide them over a temporary shortfall.
Although the differences are not great, the evidence from analyses of recently available SIPP data shows that the shorter the accounting period, the higher the poverty rate. Thus, rates estimated on a 4-month accounting period are typically between 1 and 2 percentage points higher than rates estimated on an annual accounting period (see, e.g., David and Fitzgerald, 1987; Engel, 1989; Lerman and Yitzhaki, 1989). In analysis of poverty spells that began during the first 15 months of the 1984 SIPP panel, Ruggles (1988a) similarly concluded that annual measures of poverty miss a considerable number of short spells of poverty.3
Unfortunately, no evidence is available about the extent to which short-term poverty measures might produce not only different levels but also different trends over time in comparison with an annual measure. There is limited evidence on the differences that might result in poverty rates for several population groups. Williams (1986) reported virtually no difference by family type between annual and average monthly poverty measures calculated from the 1984 SIPP panel. Ruggles' analysis (1988a), however, suggests that under a shorter rather than under a longer accounting period, a smaller proportion of the poor would be people in single-parent female-headed families.
In an analysis of program participation in the 1984 SIPP panel, Williams (1986) found evidence for the idea that a short-term poverty measure would be more suitable than an annual measure for evaluating assistance programs that use a short accounting period. Thus, 90 percent of recipients of AFDC and food stamps were in poverty at least 1 month, even though only 64-70 percent of recipients were in poverty on an annual basis.
If one wanted to develop a short-term poverty measure to supplement the annual measure to use for such purposes as program evaluation, a major issue would be to determine how short a period would be appropriate. The main argument against a monthly accounting period is that it overstates true hard-
Annual data from the PSID produce longer estimated spell durations than do monthly data from SIPP. For example, using the PSID, Duncan, Smeeding, and Rodgers (1992) find that 37 percent of poverty spells in the United States are still in progress after 3 years; in contrast, using SIPP, Ruggles (1988a) finds that only 12 to 24 percent (depending on the definition used) are still in progress after just 1 year. Presumably, SIPP is picking up short intrayear poverty spells that are missed in the PSID. Consider the case of someone who is poor for 2 consecutive years on the basis of comparing annual income to an annual poverty threshold, but who, using monthly income and monthly thresholds, is poor for the first 8 months, not poor for the next 4 months, and poor again for the last 12 months. With this pattern of income receipt, Duncan, Smeeding, and Rodgers, using PSID, will identify one spell of poverty lasting 2 years, and Ruggles, using SIPP, will observe two shorter spells.