Through his note "Poverty and Economic Growth: Has Trickle Down Petered Out?," Barry T. Hirsch, Professor of Economics at the University of North Carolina, criticizes the study by Thornton, Agnello, and Link (hereafter TAL) in 1978, regarding the relationship between poverty and economic growth from 1947 to 1974. According to TAL, the trickle down effect of economic growth on poverty, which is defined using a fixed threshold, is remarkably less in the post 1963 period than that in the 1947-1963 period. Thus, trickle down has petered out and will predictably vanish in the future. .
TAL also argues that, when a definition of poverty using an increasing threshold is used, there has still been no statistically remarkable trickle down effect in the post 1963 period for any demographic group. .
Consequently, as for policy implication, TAL claim that the fight against poverty will need expanded programs directed specifically at poor families. In the model of TAL, the estimated regression equation is as follows: P = a + b1%GNP + b2U + b3%TR + b4D%GNP, "in which P is the change in the incidence of poverty, calculated as the percentage of families below some threshold income level, and computed using both a fixed threshold and a semi-relative threshold; %GNP is the percentage change in real CNP per capita; D = 1 in 1964-1974 and 0 otherwise; U is the unemployment rate; and %TR is the percentage change in real transfer payments per capita. Regressions utilizing the poverty variables with both fixed and semi-relative thresholds are estimated for all families and separately for families by the race, sex, and age of heads. .
The criticisms of the TAL study by Hirsch are classified into four categories. The first serious weakness of the TAL model is the use of a dependent variable measuring the absolute change in the incidence of poverty instead of one measuring changes in poverty relative to its base.
