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Why Is U.S. Poverty Higher In Nonmetropolitan Than Metropolitan Areas? Evidence From The Panel Study Of Income Dynamics

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  • Fisher, Monica G.
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    Abstract

    In the United States, low-income people are not evenly distributed across the rural-urban landscape. Does this phenomenon partly reflect that people who "choose" to live in rural areas have unmeasured attributes related to poverty? To address this question, I use data from nine waves of the Panel Study of Income Dynamics (PSID) to track economic well-being and rural/urban residential choice among a sample of 6,461 householders. A series of multivariate regression models are estimated in which the dependent variable is a householder's income to need and explanatory variables are individual attributes and place-level factors, including whether the county of residence is nonmetropolitan (nonmetro). First I estimate an ordinary least squares (OLS) model which excludes educational attainment variables. I then estimate an OLS model with controls for education. Finally, I estimate an individual fixed-effects regression model that controls for observed education and unobserved income capacity. I find that the effect on income to need of living in a nonmetro area is reduced substantially as more stringent controls for individual heterogeneity are implemented. Specifically, the first regression shows that nonmetro householders have income to need that is 26 percent lower than metro householders. The fixed-effects specification, by contrast, indicates a rural-urban gap in economic well-being of only 7 percent. Taken together, results suggest that one explanation for the higher incidence of poverty in rural than urban areas is that people with personal attributes associated with having low income tend to sort themselves into rural places.

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    Bibliographic Info

    Paper provided by Oregon State University, Rural Poverty Research Center (RPRC) in its series Working Papers with number 18904.

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    Date of creation: 2005
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    Handle: RePEc:ags:osruwp:18904

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    Postal: 200 Mumford Hall, University of Missouri, Columbia, Missouri 65211
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    Web page: http://www.rprconline.org/index.htm
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    Related research

    Keywords: rural; poverty; residential mobility; omitted variable bias; Food Security and Poverty;

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    1. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
    2. Signe-Mary McKernan & Robert I. Lerman & Nancy Pindus & Jesse Valente, 2000. "The Relationship between Metropolitan and Nonmetropolitan Locations, Changing Welfare Policies, and the Employment of Single Mothers," JCPR Working Papers 192, Northwestern University/University of Chicago Joint Center for Poverty Research.
    3. John M. Ulimwengu & David S. Kraybill, 2004. "Poverty over Time and Location: An Examination of Metro-Nonmetro Differences," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1282-1288.
    4. Blank, Rebecca M., 2004. "Poverty, Policy And Place: How Poverty And Policies To Alleviate Poverty Are Shaped By Local Characteristics," Working Papers 18920, Oregon State University, Rural Poverty Research Center (RPRC).
    5. John H. Tyler & Richard J. Murnane & John B. Willett, 1999. "Do the Cognitive Skills of School Dropouts Matter in the Labor Market?," NBER Working Papers 7101, National Bureau of Economic Research, Inc.
    6. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
    7. Fisher, Monica G., 2004. "On The Empirical Finding Of A Higher Risk Of Poverty In Rural Areas: Is Rural Residence Endogenous To Poverty?," Working Papers 18917, Oregon State University, Rural Poverty Research Center (RPRC).
    8. John Cawley & Karen Conneely & James Heckman & Edward Vytlacil, 1996. "Cognitive Ability, Wages, and Meritocracy," NBER Working Papers 5645, National Bureau of Economic Research, Inc.
    9. Gibbs, Robert & Kusmin, Lorin D. & Cromartie, John, 2004. "Low-Skill Jobs: A Shrinking Share of the Rural Economy," Amber Waves, United States Department of Agriculture, Economic Research Service, November.
    10. Dan Rickman, 1998. "The causes of regional variation in U.S. poverty: A cross-county analysis," ERSA conference papers ersa98p13, European Regional Science Association.
    11. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
    12. Alton Thompson & Donald McDowell, 1994. "Determinants of poverty among workers in metro and nonmetro areas of the south," The Review of Black Political Economy, Springer, vol. 22(4), pages 159-177, June.
    13. Charles Brown & Greg J. Duncan & Frank P. Stafford, 1996. "Data Watch: The Panel Study of Income Dynamics," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 155-168, Spring.
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