EC 330 Problem Set 1 - Analyzing Costs and Market Areas for Factory Production

EC 330, Fall 2019 Your name: _________________________
University of Oregon Your email: [email protected]
Page 1 of 6
Problem Set #1
Due in lecture on Thursday, October 17, 2019. No late problem
sets will be accepted for credit! (Seriously.)
NOTE: To ensure proper grading, write your answers in the area
indicated.
1. (total of 6 points) End of Line The city of Terminus lies at
the western end of a rail line. To the east are a hundred
miles of wide plains along which there are several towns—all
connected to Terminus by the rail line. To the west of
Terminus are fifty miles of mountains, whose small villages are
connected by a few winding dirt roads.
The only factory in the region is in Terminus. It produces
widgets at a cost of $10 per unit at the factory door. Thanks
to the rail line, the transport cost to anywhere east of Terminus
is $0.10 per mile. Given the poor state of the roads
through the mountains, the transport costs to anywhere west of
Terminus is $0.40 per mile.
a. (1 point) Graph the costs of widgets produced throughout the
entire 150-mile region. Carefully label the costs at
the factory, at the far western end of the region, and at the far

eastern end of the region.
b. (1 point) Assume that the cost of making a widget at home is
$18. What is the market area for the factory? (That
is, how many miles west of Terminus will it stretch, and how
many miles east of Terminus will it stretch?) Show
your work.
number of miles to
the west of Terminus
number of miles to
the east of Terminus
Terminus
Cost (in $)
← west east →
EC 330, Fall 2019 Problem Set 1

University of Oregon
Page 2 of 6
In reality, one of the key inputs for widgets is easier for the
residents of the eastern plains to acquire. For all
remaining parts of the problem, assume that the cost of making
widgets at home anywhere east of Terminus is
actually $16, and the cost of making widgets at home is $20
anywhere west of Terminus.
c. (1 point) Now what is the market area for the factory? (That
is, how many miles west of Terminus will it stretch,
and how many miles east of Terminus will it stretch?) Show
your work.
number of miles to
the west of Terminus
number of miles to
the east of Terminus
The owners of the factory would like its market area to extend
more broadly, and they are considering two investment
options:
• First, they could help the government of the region finance the
upgrading and paving of the mountain roads,
which would reduce the transport costs west of Terminus to
only $0.20 per mile. (The transportation costs east of

Terminus would stay at $0.10 per mile.)
• Second, they could purchase and install in expensive new
equipment in the factory that would reduce the cost of a
widget at the factory door to only $8 per unit.
Each of these options would cost exactly the same, and the
owners of the factory can choose only one of these
options. Assume that potential customers for widgets are
distributed evenly across the entire 150-mile region.
d. (1 point) How many additional miles (on either side of
Terminus) would be added to the factory’s market area
under the first investment option of upgrading and paving the
mountain roads? Show your work.
miles added to the
factory’s market area
Page 3 of 6
e. (1 point) How many additional miles (on either side of
Terminus) would be added to the factory’s market area
under the second investment option of installing new equipment
in the factory? Show your work.
miles added to the

factory’s market area
f. (1 point) Given the answers to parts d) and e) above, which
investment option will the factory owners choose?
Briefly explain why they will go with that option.
2. (total of 2 points) Making Beer and Wine Consider the
locations of breweries and wineries.
a. (1 point) Most breweries locate close to their customers and
far from their primary input sources. Based on our
discussion of market-oriented and materials-oriented firms
explain why that is usually the case.
b. (1 point) Most wineries locate close to their primary input
sources and far from their customers. Based on our
discussion of market-oriented and materials-oriented firms
explain why that is usually the case.

Page 4 of 6
3. (total of 6 points) Contemplating Clustering. Consider an
entrepreneur who sells jewelry for $50 per piece.
Clustering with similar entrepreneurs would increase labor
costs, but it would allow some of the intermediate materials
to be made at larger scales, thus reducing per-unit costs.
a. (1 point) Fill out the rest of the table below, finding the
total cost per piece as well as the profit per piece for an
entrepreneur depending on how many other entrepreneurs there
are in a cluster.
Number of entrepreneurs 1 2 3 4 5 6 7
Labor cost per piece 5 6 8 11 15 19 27
Cost of materials per piece 25 20 16 14 12 10 9
Total cost per piece
Profit per piece
b. (1 point) Using the data in the table above graph the labor

costs per piece, the costs of materials per piece, and
the total costs per piece as functions of the number of
entrepreneurs in a cluster. Carefully draw and label each
of these three separate functions in your graph.
0
5
10
15
20
25
30
35
40
0 1 2 3 4 5 6 7

of 6
c. (1 point) Fill out the following table, finding the profit gap
between locating in clusters of more than one
entrepreneur compared to locating to an isolated site (i.e., a
cluster of size 1). That is, how much more profit will
the firm earn in a cluster of multiple entrepreneurs compared to
working in an isolated site (i.e., a cluster of size 1)?
Then graph the profit graph on the grid below.
Number of entrepreneurs 1 2 3 4 5 6 7
Profit gap (0)
d. (1 point) What would we expect the equilibrium cluster size
to be? No explanation needed (yet).
equilibrium
cluster size
e. (1 point) Briefly explain why the equilibrium cluster size
wouldn’t be smaller than your answer in part (d).
f. (1 point) Briefly explain why the equilibrium cluster size
wouldn’t be larger than your answer in part (d).

-10
-5
0
5
10
15
0 1 2 3 4 5 6 7
Page 6 of 6
4. (total of 3 points) Rank (But Not the Album by The Smiths)
Assume that the rank-size rule for cities is exactly
true and that the second-largest city in a region has 8 million
people.
a. (1 point) How many people live in the region’s largest city?
Show your work.

population of
largest city
b. (1 point) How many people live in the region’s fourth-
largest city? Show your work.
population of
fourth-largest city
c. (1 point) How many people live in the region’s tenth-largest
city? Show your work.
population of
tenth-largest city
CHILD POVERTY–DESTRUCTION OF THE NATION’S
HUMAN CAPITAL

Poverty is Not Just an Indicator: The Relationship
Between Income, Poverty, and Child Well-Being
Ajay Chaudry, PhD; Christopher Wimer, PhD
From the Georgetown Center on Poverty and Inequality (Dr
Chaudry), Georgetown University Law Center, Washington, DC;
and Columbia
University School of Social Work (Dr Wimer), New York, NY
The authors report no conflicts of interest.
Address correspondence to Ajay Chaudry, PhD, New York
University Institute for Human Development and Social Change,
Robert F. Wagner
Graduate School of Public Service, 295 Lafayette St, New York,
NY 10012 (e-mail: [email protected]).
ABSTRACT
A
C
In this article, we review the evidence on the effects of poverty
and low income on children’s development and well-being. We
argue that poverty is an important indicator of societal and child
well-being, but that poverty is more than just an indicator.
Poverty and low income are causally related to worse child
development outcomes, particularly cognitive developmental
and educational outcomes. Mechanisms through which poverty
affects these outcomes include material hardship, family stress,
parental and cognitive inputs, and the developmental context to
CADEMIC PEDIATRICS
opyright ª 2016 by Academic Pediatric Association S23
which children are exposed. The timing, duration, and commu-
nity context of poverty also appear to matter for children’s out-
comes—with early experiences of poverty, longer durations of
poverty, and higher concentrations of poverty in the community
leading to worse child outcomes.

KEYWORDS: child development; income; poverty
ACADEMIC PEDIATRICS 2016;16:S23–S29
RATES OF CHILDHOOD poverty in the United States
have remained very high over the past 40 years. According
to the official poverty measure, approximately 1 in 5 chil-
dren live in families with incomes below the federal
poverty threshold ($23,834 for a family of 4 in 2014),1
and the child poverty rate has been near or above 20%
(ranging between 16 and 23 percent) for most years since
the end of the 1970s (Figure). Alternative poverty measures
that incorporate improvements show more progress in
reducing child poverty rates over time (see Wimer et al,
in this issue of Academic Pediatrics2), but by any measure
contemporary child poverty rates remain troublingly high.
The childhood poverty rate is a vital indicator of chil-
dren’s well-being. As a measure, the child poverty rate tells
us how many children at a point in time are living in fam-
ilies with annual incomes or economic resources that are
below a consistent threshold considered insufficient to
meet basic needs. The child poverty rate is thus a key indi-
cator of a society’s health and well-being. It contributes to
our understanding of whether our economy is working
well, if it is distributing the nation’s economic gains to
its most vulnerable and dependent citizens, and if it is
equipping the nation for the future by supporting the
human capital formation of future workers.
The child poverty rate is also a moral standard of what
a society is willing to allow children to experience by the
accident of their births into particular circumstances,
which in many cases, means suffering the deprivation of
basic needs by which to grow and come of age, facing
diminished opportunities for success, and limited

chances for full participation in their society’s growth
and development.
Child poverty measures are blunt and imperfect,
3 and
alone are insufficient to understand the true level of depri-
vation of children in the United States. However, the child
poverty rate does provide a consistent marker that has been
used to depict a widening picture of the nature and conse-
quences of economic deprivation early in life over the past
century. As such, it continues to provide an important tool
for understanding how income and deprivation in child-
hood compromise children’s healthy development and op-
portunities to succeed later in life.
In this article we briefly review the research of the rela-
tionship between family poverty experienced during child-
hood and the well-being and outcomes for children,
including into young adulthood. Next, we discuss 2 of
the primary mechanisms that researchers have identified
for how poverty affects children’s developmental out-
comes, through the material hardships and constrained in-
vestments families are able to make and through parental
stress and limitations on parenting capacities. Finally, we
review the extent to which the effects of childhood poverty
vary on the basis of its timing, duration, and concentration.
We conclude with a brief summary of findings.
Volume 16, Number 3S
April 2016
10.5%
Ages 18-64
13.6%

28.5%
Ages 65+
14.6%
9.5%
19.0%
14.5%
23.0%
14.0%
16.4%
22.3% 22.7%
16.2%
Ages 0-17
18.0%
22.0%
19.9%
0%
10%
20%
30%

40%
1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
2008
All people, all
ages
2013
Figure. Percentage of population in poverty according to age
group, 1964–2013.
S24 CHAUDRY AND WIMER ACADEMIC PEDIATRICS
THE EFFECTS OF CHILDHOOD POVERTY ON
CHILD WELL-BEING AND OUTCOMES
One of the reasons we care about the childhood poverty
rate beyond its role as an indicator, is the strong link be-
tween family poverty experienced during childhood and
the well-being and outcomes for children, including into
young adulthood. Many studies over the past several de-
cades have documented the significantly worse outcomes
and conditions across various measures of child health, ed-
ucation, and behavior for children who live in poor families
and their experience during childhood and into adulthood
compared with nonpoor children. The child poverty rate,
however, does not capture benefits distributed through
the tax system, such as the Earned Income Tax Credit or
Child Tax Credit. Nor does it capture in-kind benefits
like housing assistance or food stamps. Both of these are
substantial antipoverty programs that provide resources
to low-income families with children.
In a 1997 article for the Future of Children, Jeanne
Brooks-Gunn and Greg Duncan

4 summarized the strength
and consistency of associations between child poverty and
a wide range of measures of children’s well-being. To pro-
vide a similar summary rooted in more contemporary data,
we show how numerous developmental indicators vary be-
tween poor and nonpoor children (Table).5–11 Among
health measures, childhood obesity was 40% more
prevalent among poor families; asthma was 30% more
common; and, children in poor families were 4 times
more likely to be in fair or poor health. For education,
grade repetition and dropping out of high school were
approximately twice as likely among poor than nonpoor
children. Children who were poor were nearly 9 times
more likely to have very low food security and almost 7
times more likely to become a teenage mother. The size
of many of these simple associations between childhood
poverty and the wide range of measures of child well-
being and longer-term outcomes are startlingly large, and
consistent with the scale of differences for many of these
indicators between poor and nonpoor children from 2 de-
cades before.
As Table shows, it is well established that children from
poor families do less well than children from higher-
income families across a wide spectrum of health condi-
tions, developmental and educational outcomes, material
hardship levels, and other key outcomes from birth to early
adulthood. This has led to a wealth of research on whether
these relationships are causal. That is, is it the lack of in-
come itself that leads to poor outcomes for children, or is
it something else about poor children or their families
that leads to poor outcomes, something that is merely
correlated with lack of income. This “something else”
could be anything that differs between poor and nonpoor
families other than poverty: parenting skills, education,
availability of time, genetics, etc. Although there remains

some debate in the literature on this subject, the balance
of the research supports the conclusion that income poverty
is causally related to children’s developmental outcomes.
In this section, we briefly review what we know about
the relationships between income, poverty, and children’s
developmental outcomes.
As with most research questions of this sort, early
research focused on observational studies on the empirical
relationships between income, poverty, and various devel-
opmental outcomes, controlling for other observed factors
that might be associated with both.
3,12 In general, these
studies reported evidence in support of the idea that
income might lead to improvements in child outcomes—
evidence that was consistent with some later research
that used more sophisticated techniques to move closer to
causal claims, such as sibling models that compare
siblings who experience different family incomes during
their childhoods
13 or fixed-effects models that harness
change in income over time within families.14 Even these
more analytically sophisticated studies have difficulty
ruling out competing alternatives.
Clearer evidence comes from a set of natural experi-
ments and experimental studies that have taken place in
recent decades. An early study of the effects of the exper-
imental negative income tax reported that the program had
positive effects on children’s academic performance, at
Table. Selected Population-Based Indicators of Well-Being for

Poor and Nonpoor Children in the United States
Indicator
Percentage
of Poor Children
(Unless Noted)
Percentage
of Nonpoor Children
(Unless Noted)
Ratio of Poor to
Nonpoor Children
Physical health conditions/outcomes (for children between 0
and 17 years and in year 2014 unless noted)
Reported to be in excellent health5 48.9 66.9 0.7
Reported to be in fair to poor health5 3.2 0.8 4.0
Uninsured for health care5 6.2 3.5 1.8
Currently has asthma5 11.0 8.2 1.3
Obesity (ages 2–19 years; 2009–2012)6 21.2 15.7 1.4
Made 1 or more emergency room visits in past 12 months5 24.4
12.7 1.9
Missed 11 or more school days in past 12 months because of
illness
or injury (ages 5–17 years)5
4.8 2.9 1.7
Developmental conditions/outcomes

Learning disability (ages 3–17 years)5 10.1 5.3 1.9
Serious emotional or behavioral difficulty (ages 4–17 years;
2012)7 7.8 4.5 1.7
Education conditions/outcomes
Grade repetition (reported repeated a grade; ages 6–17 years)8
18.0 7.8 2.3
Receiving special education or early intervention services
(ages 0–17 years)5
10.4 6.2 1.5
School-aged child with IEP (ages 6–17 years; 2012)8 14.4 10.6
1.4
Attends unsafe school (reported child is never or sometimes
safe
at school)8
15.1 5.3 2.8
High school dropout (percentage of 16- to 24-year-olds who
were
not in school or did not finish high school in 2013)9*
10.7 5.7 1.9
Food and nutrition conditions/outcomes
Food-insecure children (report 3 or more food-insecure
conditions
among 18 questions used to assess food security among
households with children)10
25.0 6.0 4.2
Children with very low food security (report 8 or more food-
insecure

condition among 18 questions or report 5 or more food-insecure
conditions specifically focused on children’s food security)10
3.5 0.4 8.8
Other
Woman who had 1 or more teen, unmarried births† 27 4 6.8
Woman who had 1 or more unmarried births (before age 30
years)‡ 42 10 4.2
Man, ever arrested (before age 30 years)‡ 21 14 1.5
Annual earnings at age 30 years‡ $30,500 $52,300 0.6
IEP indicates individualized education program.
*Children are divided into family income quartiles, with
children in lowest quartile approximating children who are
income-poor and other
three quartiles non-poor children.
†Data from the Panel Study of Income Dynamics.11 Ratcliffe C,
McKernan SM. Based on children born between 1967-1989;
outcomes
measured at ages 20. 2012.
‡Data from The Panel Study of Income Dynamics.
11
Magnuson K, Ziol-Guest K. Based on 2122 children born
between 1968 and 1978;
outcomes measured at age 30.
ACADEMIC PEDIATRICS INCOME, POVERTY, AND CHILD
WELL-BEING S25

least for younger children and especially for children in the
poorest families.15,16 These interventions, however,
changed employment and income of parents, so it is not
possible to isolate the effects of income poverty itself
from the results of these experiments, although it again is
suggestive of such effects.17,18
Duncan et al17 review much of the literature of studies
that purport to establish a causal effect of income on child
outcomes. Almost all of these studies strongly suggest a
causal effect of income on children’s outcomes, although
often the effect sizes in such studies suggest that it would
take substantial income boosts to provide a meaningful
change in children’s outcomes. Dahl and Lochner,
19 for
instance, harness change generated by expansions in the
Earned Income Tax Credit to show that increased income
is associated with improved academic achievement. Milli-
gan and Stabile20 use variation in Canada’s National Child
Benefit’s generosity across Canadian provinces to show
evidence for positive effects on math and vocabulary
scores. An important set of studies in North Carolina that
compared American Indian to non-American Indian fam-
ilies, wherein American Indian families began receiving
an exogenous change in their incomes because of distribu-
tion of casino profits from a newly-opened casino in the
region, found that this exogenous change led to improved
educational outcomes, reduced crime, and fewer
psychiatric and psychopathologies in childhood and
adolescence.
21–23
Duncan et al
17

reported similar results
by harnessing data from 16 welfare reform experiments,
some of which improved income and others that changed
employment outcomes only without improving incomes.
Using random assignment as an instrument for income,
they also reported positive effects of income on the aca-
demic achievement of young children.
17
Taken together, the body of the evidence does suggest that
improved income and reduced poverty can lead to meaning-
ful improvements in children’s outcomes, particularly their
academic and educational outcomes. How would improving
family incomes and reducing family poverty lead to these
improvements? We review this in the next section.
MECHANISMS BY WHICH INCOME POVERTY
AFFECTS CHILD OUTCOMES
If more income leads to improved developmental out-
comes for children, why might that be the case? In this sec-
tion, we describe some of the mechanisms by which
poverty and low income might compromise children’s
development, and alternatively, how improved family
incomes and reduced poverty might improve children’s
outcomes.
Poverty directly reduces the resources available for day
to day consumption, leading to increased levels of what
researchers call “material hardships.” Such hardships can
include inability to afford adequate and nutritious food

(“food insecurity”), or inability to meet other basic needs,
such as housing, medical care, or bills and utilities. Expe-
riences of material hardship are substantially, although
not perfectly, linked to family income and poverty.
24,25
Experiences of material hardship have, in turn, been
linked to worse child outcomes.26–29 In addition, income
poverty is associated with lower parental capacity to
invest in developmental inputs that contribute to
children’s development and educational outcomes,
including educational toys, books, and high-quality early
care and education.
30
Poverty has also been found to compromise family pro-
cesses conducive to healthy child development. Poverty
and low-income adds to parental stress and the relational
qualities that provide the context for rearing children.
There is a long line of research in the so-called “family
stress model”31,32 highlighting the associations between
income loss, parental stress, and compromised marital
and parental relationships.33,34 Low poverty-level in-
comes contribute to psychological distress for parents
and reduce their capacity to engage in warm, responsive
interactions with children that are key to stimulating chil-
dren’s growth, development, and socioemotional secu-
rity.35 Poverty and economic insecurity contribute to
higher levels of maternal depression and other mental
health challenges that affect parents’ responses to and in-
teractions with children.36,37 Across childhood low family
income has been linked to many relational qualities
between parents and their children, including less secure
attachment, less warmth, less attention, harsh discipline,

and negative mood.30,38,39
In addition to family processes and stress, poverty and
low income have also been linked to a heightened experi-
ence of what some researchers label a “context of
chaos.”40,41 Experiences of chaotic home lives and
community conditions such as substandard housing,
community violence, and neighborhood disorganization
have in turn been linked longitudinally to worse
socioemotional outcomes for children and youth.41 Experi-
ences of chaos and stress might lead to the impairment of
children’s ability to adapt physiologically to their environ-
ment, hampering their long-term outcomes. For example,
increased allostatic load in children in response to external
stress might compromise healthy physiological and mental
processes, and contribute to worse child outcomes.
The processes by which poverty increases parental stress
might be especially important in the earliest years when the
home environment and parenting are primary forces
shaping children’s biological, neurological, and psychoso-
cial pathways. There has been an especially rapidly devel-
oping literature on how chronic stress in the first years of
life negatively affects the functioning of children’s immune
systems and the structure and function of the young
brain.
42,43
THE TIMING, DURATION, AND CONCENTRATION
OF CHILDHOOD POVERTY EXACERBATE THE
EFFECTS ON CHILD OUTCOMES
Poverty is a common experience among American chil-
dren, but one that varies in its timing, duration, and concen-
tration. More than one-third of all children experience
poverty for at least 1 year during childhood; more than

60% of children never experience poverty.44 Children
who experience at least 1 year of poverty, on average,
have worse outcomes than children who are never poor,
suggesting that childhood poverty is a deleterious experi-
ence for many children who experience it. Yet, the conse-
quences of poverty can be much worse still on a range of
outcomes for children who experience it early or persis-
tently over the course of childhood, and those who experi-
ence it as a concentrated, common experience in very
disadvantaged communities. Poverty also varies in its in-
tensity, with some families falling much further below
the poverty line than others. Although this also can be
important for children’s development, and outcomes are
worse for children who experience extreme poverty, it is
beyond the scope of this article.
POVERTY AT BIRTH AND IN EARLY CHILDHOOD
Not only are poverty rates for children higher in the
United States than for working-age adults or the elderly,
as we saw in the Figure, but among children, poverty rates
are their highest in the earliest years of childhood. In 2013,
5.4 million children (22%) younger than age 6 years lived
in poverty, and 40% of all children younger than 6 years
experience early childhood poverty lasting at least 1
year.
45 Being born into poverty strongly predicts future
childhood and adult poverty.44
Early childhood is a period when children are especially
vulnerable to the negative effects of their families’ poverty
and limited resources.3 A large body of developmental and
neuroscience research shows the important and lasting ef-
fects of early environments to building early cognitive and
socioemotional capacities and the rapid pace of the brain’s

development during the first 3 years of life.46,47 Poverty in
these early years might promote contexts that evoke stress,
which might then negatively affect the structure and
function of the young brain.
43
Early childhood poverty has been reported to be most
strongly associated with negative cognitive development
and educational outcomes. Children living in poverty as in-
fants and toddlers are approximately 30% less likely to
WELL-BEING S27
complete high school than those who first experience
poverty later in childhood.48 Other studies have similarly
reported that poverty in early childhood (between birth
and age 5 years) has a significantly greater effect on
children’s years of schooling and other education
outcomes than the effect of poverty later in childhood,
but did not report differences for some other longer-term
outcomes—including teen childbearing and whether boys
had been arrested by young adulthood—on the basis of
the timing of poverty experienced earlier in childhood.
13,45
None of this is to suggest that poverty experienced later in
childhood is inconsequential for long-term outcomes, but
simply that early childhood has been reported to be a
period in which children are particularly vulnerable to
the deleterious effects of scarce resources.
EFFECT OF CHRONIC VERSUS SHORT-TERM
POVERTY

Poverty over longer periods makes it more difficult to
buffer against the levels of material hardships and psycho-
logical stress, making persistent poverty more strongly pre-
dictive of children’s later well-being than shorter bouts of
poverty.49 For many who experience poverty in childhood,
poverty lasts only a relatively short duration, but for some,
poverty persists for significant lengths of time across child-
hood, and this is especially true of children who are in poor
families at the time of their birth and during early child-
hood. Caroline Ratcliffe and Signe-Mary McKernan
44,48
found that among a nationally representative sample of
children born over the course of more than 20 years, half
of those who were born into poor families spent most of
their childhood in poverty. In contrast, of children who
are not born into poor families, only 4% (or 1 in 25) go
on to be persistently poor in childhood, and nearly 90%
of those who were not poor during their early childhood
years never experienced poverty in middle childhood or
in their adolescent years.
48 Experiencing persistent poverty
is even more common among children of color. African
American children, who have 3 times the poverty rate of
white children overall, are even more likely to be persis-
tently poor than other racial and ethnic groups. Although
approximately one-third of white newborns who are born
into poor families go on to be persistently poor across
childhood, this is true for approximately two-thirds of
black newborns. Among African American children who
are not in poor families at the time of birth, more than
15% have nevertheless gone on to become persistently
poor across childhood; for white children who are not

poor at birth, just 1% become persistently poor.
48
In a recent study, children who were persistently poor
were much more likely than those who were never poor
or poor for shorter periods to not graduate from high
school, earn significantly lower earnings as adults, to be
poor as adults, and to report being in poorer health as
adults. In addition, boys who experienced persistent
poverty were more likely to have been arrested by young
adulthood, and girls who experienced persistent poverty
were much more likely to have had teen nonmarital births
and nonmarital births as adults.
45 This is consistent with
the relationship between persistence of poverty during
childhood with worse adolescent and adult outcomes re-
ported in previous studies.44,48,50–52 The greater the
duration of childhood poverty the greater is the
likelihood of all of these negative outcomes. Although
precise estimates of causal effects are difficult to glean
from such studies, the bulk of the evidence suggests that
more persistent poverty is worse for children than less
persistent poverty.
EFFECT OF CONCENTRATED AND NEIGHBORHOOD
POVERTY
In addition to the timing and persistence of childhood
poverty, children are also affected by the level of poverty
in their community, particularly those who live in areas
of high poverty. Magnuson53 reported on recent analyses
showing that child outcomes vary a lot according to neigh-
borhood poverty levels in addition to family poverty.
Across a range of early childhood outcomes—reading

and math skills at kindergarten entry, reported poor
health—children in areas with higher levels of neighbor-
hood poverty have worse outcomes, and this is particularly
true for children who are in poor families, but also true for
children in nonpoor families. This is consistent with much
previous research that reported living in severely disadvan-
taged communities might be an exacerbating factor that
contributes to worse child outcomes than family poverty
alone.
54–56 Recent studies further suggest that
neighborhood poverty can lead to a range of worse
outcomes for children as they move into adulthood and
even into future generations, and that several aspects of
the community—low-quality schools, high levels of
joblessness, social isolation, lack of positive peer
influences, low efficacy on the part of neighbors—might
contribute to these outcomes.
57–60
CONCLUSION
Poverty statistics are important indicators of the health
of the economy and the level of children’s well-being.
However, poverty is more than just an indicator. As we
have argued herein, poverty and low income appear to
be causally related to poor child outcomes, particularly
cognitive and educational outcomes. Poverty and low in-
come likely exert their effects through material hard-
ships, family stress, and reduced parental cognitive
input and spending. And it is not just poverty per se
that matters, but it is timing, duration, and concentration
in the community context. Although there have been
important advances by social scientists in improving
our understanding of the dimensions, mechanisms, and
potentially causal relationships related to childhood

poverty, there is potentially much more to be learned.
There is an ongoing need for rigorous and innovative
research, and academic pediatricians in particular can
inform the field about the biological effects of poverty,
and the potential approaches to address the effects of
poverty through medical practice. Reducing child
poverty through public policy would contribute to
meaningful improvements in children’s health, develop-
ment, and well-being.
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Poverty is Not Just an Indicator: The Relationship Between
Income, Poverty, and Child Well-BeingThe Effects of
Childhood Poverty on Child Well-Being and
OutcomesMechanisms by Which Income Poverty Affects Child
OutcomesThe Timing, Duration, and Concentration of
Childhood Poverty Exacerbate the Effects on Child
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Neighborhood PovertyConclusionReferences

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