Small-Area Income and Poverty Estimates

Priorities for 2000 and Beyond

Panel on Estimates of Poverty for Small Geographic Areas

Constance F. Citro and Graham Kalton, Editors

Committee on National Statistics

Commission on Behavioral and Social Sciences and Education

National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C.



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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond Small-Area Income and Poverty Estimates Priorities for 2000 and Beyond Panel on Estimates of Poverty for Small Geographic Areas Constance F. Citro and Graham Kalton, Editors Committee on National Statistics Commission on Behavioral and Social Sciences and Education National Research Council NATIONAL ACADEMY PRESS Washington, D.C.

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by Contract No. RN96131001 between the National Academy of Sciences and the U. S. Department of Education. Support of the work of the Committee on National Statistics is provided by a consortium of federal agencies through a grant from the National Science Foundation (Number SBR-9709489). Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 0-309-07146-1 Additional copies of this report are available from National Academy Press , 2101 Constitution Avenue, N.W., Lockbox 285, Washington, D.C. 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu Suggested citation: National Research Council (2000). Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond. Panel on Estimates of Poverty for Small Geographic Areas, Constance F. Citro and Graham Kalton, editors. Committee on National Statistics. Washington, D.C.: National Academy Press. Printed in the United States of America Copyright 2000 by the National Academy of Sciences. All rights reserved.

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond THE NATIONAL ACADEMIES National Academy of Sciences National Academy of Engineering Institute of Medicine National Research Council The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council.

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond PANEL ON ESTIMATES OF POVERTY FOR SMALL GEOGRAPHIC AREAS GRAHAM KALTON (Chair), Westat, Rockville, Maryland DAVID M. BETSON, Department of Economics, University of Notre Dame NANCY E. DUNTON, Midwest Research Institute, Kansas City, Missouri WAYNE A. FULLER, Department of Statistics, Iowa State University THOMAS B. JABINE, Consultant, Washington, D.C. SYLVIA T. JOHNSON, School of Education, Howard University THOMAS A. LOUIS, School of Public Health, University of Minnesota SALLY C. MORTON, RAND, Santa Monica, California JEFFREY S. PASSEL, Urban Institute, Washington, D.C. J.N.K. RAO, Department of Mathematics and Statistics, Carleton University, Ottawa, Ontario ALLEN L. SCHIRM, Mathematica Policy Research, Inc., Washington, D.C. PAUL R. VOSS, Department of Rural Sociology, University of Wisconsin JAMES H. WYCKOFF, Graduate School of Public Affairs, State University of New York, Albany ALAN M. ZASLAVSKY, Department of Health Care Policy, Harvard Medical School CONSTANCE F. CITRO, Study Director MICHAEL L. COHEN, Senior Staff Officer MICHELE VER PLOEG, Research Associate MEYER ZITTER, Consultant TELISSIA M. THOMPSON, Senior Project Assistant JAMIE CASEY, Project Assistant

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond COMMITTEE ON NATIONAL STATISTICS 1999-2000 JOHN E. ROLPH (Chair), Marshall School of Business, University of Southern California JOSEPH G. ALTONJI, Department of Economics, Northwestern University LAWRENCE D. BROWN, Department of Statistics, University of Pennsylvania JULIE DAVANZO, RAND, Santa Monica, California WILLIAM F. EDDY, Department of Statistics, Carnegie Mellon University HERMANN HABERMANN, Statistics Division, United Nations, New York WILLIAM D. KALSBEEK, Survey Research Unit, Department of Biostatistics, University of North Carolina RODERICK J.A. LITTLE, School of Public Health, University of Michigan THOMAS A. LOUIS, School of Public Health, University of Minnesota CHARLES F. MANSKI, Department of Economics, Northwestern University EDWARD B. PERRIN, Department of Health Services, University of Washington FRANCISCO J. SAMANIEGO, Division of Statistics, University of California, Davis RICHARD L. SCHMALENSEE, Sloan School of Management, Massachusetts Institute of Technology MATTHEW D. SHAPIRO, Department of Economics, University of Michigan ANDREW A. WHITE, Director

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond Acknowledgments The Panel on Estimates of Poverty for Small Geographic Areas wishes to thank the many people who contributed to the preparation of this, the panel's final report, and to the panel's work over the past 4 years. The panel's three interim reports (updated and combined into a single volume, National Research Council, 2000c) evaluated the Census Bureau 's estimates of poor school-age children for use in allocating Title I funds; this report outlines an agenda for research and development of the Bureau's income and poverty estimates for small areas and discusses issues about the use of such estimates. We thank, first, current and former staff of the Census Bureau who prepared the poverty estimates for states, counties, and school districts that we reviewed, many of whom also worked on the evaluations of those estimates: David Aultman, William Bell, Patrick Cardiff, John Coder, Robert Fay, Robin Fisher, Matthew Kramer, Esther Miller, Mark Otto, Ronald Prevost, Douglas Sater, Paul Siegel, Cotty Armstrong Smith, Alexander Strand, Jess Thompson, George Train, David Waddington, and Signe Wetrogan. We also thank the Census Bureau staff who facilitated the arrangements for the work: Cynthia Clark, Nancy Gordon, Charles Nelson, and Daniel Weinberg. We thank Charles Alexander, Pat Doyle, and Joseph Knott, respectively, for useful information about the planned American Community Survey, the Survey of Income and Program Participation, and the Bureau's Master Address File and geocoding capabilities. Daniel Kasprzyk of the National Center for Education Statistics, who

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond served as project officer for the study for the U.S. Department of Education, was most helpful in facilitating the panel's work throughout the project. The panel also appreciates the help of other Department of Education staff—particularly, Sandy Brown, Kay Rigling, William Sonnenberg, and Stephanie Stullich—in providing information and educating us about the allocation process for the Title I program. We thank Don Oellerich of the U.S. Department of Health and Human Services for an informative presentation to the panel on the uses of small-area income and poverty estimates for social welfare program analysis and administration. We also thank Patricia Becker of APB Associates for her study of possible sources of administrative records for small-area income and poverty estimates. I thank my panel colleagues for their sustained commitment to the work of the panel. For contributions to the final report, I particularly thank Nancy Dunton, who supervised the collection of information about state uses of small-area income and poverty estimates for fund allocation (see Chapter 2); Tom Louis, who contributed importantly to the research and development agenda for the current Census Bureau income and poverty models (see Chapter 3); and Alan Zaslavsky, Allen Schirm, and David Betson, who analyzed the interactions of provisions of fund allocation formulas and uncertainty in estimates of poverty (see Chapter 6 and the Appendix). The panel was assisted by a very able staff. The panel is enormously indebted to Connie Citro, who has done a superlative job as the project 's study director. Her exceptional writing skills and depth of understanding of the many complex matters involved were irreplaceable input to our efforts, enabling the panel to produce four reports under very demanding deadlines. Connie had prime responsibility for drafting all the reports. Her skills in doing so, her good humor in crafting revisions, and her ability to keep the panel on track contributed greatly to the enjoyment of participating in this project. Michael Cohen made important contributions throughout the entire project and assisted in drafting the section of the final report on the current income and poverty models. Michele Ver Ploeg assembled the information on federal program uses of small-area income and poverty estimates and drafted the section on the needs for such estimates. Meyer Zitter contributed to the section on uses of administrative records for improved estimates. Telissia Thompson and Jamie Casey provided excellent administrative support for the study and for the preparation of the report. Eugenia Grohman, associate director for reports of the Commission on Behavioral and Social Sciences and Education, improved the report through her fine technical editing. To all we are grateful.

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the Report Review Committee of the National Research Council. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We thank the following individuals for their participation in the review of this report: John Adams, RAND, Santa Monica, California; John F. Geweke, Department of Statistics, Henry B. Tippie School of Business, University of Iowa; Malay Ghosh, Department of Statistics, University of Florida; Roderick J. A. Little, Department of Biostatistics, School of Public Health, University of Michigan; Lee Rainwater, Department of Sociology, Harvard University; Edward Spar, Council of Professional Associations on Federal Statistics, Alexandria, Virginia; Bruce Spencer, Department of Statistics, Northwestern University; and Harold Watts, Greenport, New York. Although the individuals listed above provided constructive comments and suggestions, it must be emphasized that responsibility for the final content of this report rests entirely with the authoring panel and the institution. Graham Kalton, Chair Panel on Estimates of Poverty for Small Geographic Areas

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond Contents     EXECUTIVE SUMMARY   1      Conclusion,   2      Using Estimates in Programs,   2      Recommendations for Producers and Users,   3      Recommendations for SAIPE,   4  1   INTRODUCTION   11      Background,   12      SAIPE in Brief,   14      Plan of the Report,   16  2   NEEDS FOR SMALL-AREA INCOME AND POVERTY ESTIMATES   18      Program Trends,   18      Requirements for Estimates,   22      Data Sources,   34      Conclusion,   42  3   CURRENT SAIPE MODELS   44      User Overview,   44      Models for Poor School-Age Children,   47      Other SAIPE Models,   63      Population Estimates,   66      Priorities for SAIPE Model Development,   72      Conclusion,   81

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond  4   FUTURE MODEL DEVELOPMENT: THE ROLE OF SURVEYS   82      User Overview,   82      Survey Features,   86      Uses of Surveys for SAIPE,   100      Evaluating Alternative Uses,   101      Analysis and Conclusions,   113  5   FUTURE MODEL DEVELOPMENT: THE ROLE OF ADMINISTRATIVE RECORDS   125      Overview,   125      Tax Return Data,   127      Food Stamp Data,   130      Geocoding with TIGER and MAF,   133      School Lunch Data,   137      Data Needs for Population Estimates,   142      Recommendations,   148  6   USING ESTIMATES IN ALLOCATION FORMULAS   150      Overview,   150      Bias,   153      Variability,   154      Conclusion,   159  7   RECOMMENDATIONS FOR PRODUCERS AND USERS   161      Production of Estimates,   162      Use of Estimates,   165      Deciding to Use Estimates for Programs,   166     Appendix: Interactions Between Survey Estimates and Federal Funding Formulas Alan M. Zaslavsky and Allen L. Schirm   167     References and Bibliography   191     Biographical Sketches of Panel Members and Staff   201

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Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond Small-Area Income and Poverty Estimates

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