Government Transfers and Poverty Transition in Metro and Nonmetro Areas: A Survival Analysis

Most of the studies on poverty dynamics fail to assess explicitly the role of government transfers on movements into and out of poverty while formally accounting for difference between metro and nonmetro areas. In this paper the dynamics on and off poverty is estimated using a discrete duration model where the exit from and entry into poverty refer to a temporal sequence in which the passage of time is combined with events marking transitions between different poverty states. Extending the current literature, I assessed the impact of different government transfers under the welfare program, including training programs, on the probability of exit from and entry into poverty in metro and nonmetro areas. Controlling for both individual and geographical characteristics, the results suggest that different government transfer programs yield different results depending on the location where the transfers are made. In addition, this study explicitly derives the impact of welfare reform undertaken in 1996. With respect to the 1996 reform, the study shows that outcomes differ from one program to another; here too, the distribution of 1996 reform varies across geographical locations, especially between urban and rural areas. Summing up these findings, this study provides additional evidence in favor of space-based antipoverty policies. Indeed, since the impacts are not homogeneous across locations, geographical targeting that account for individual characteristics should increase the efficiency of welfare program as instrument for poverty alleviation.