The Determinants of Rural Poverty and Characteristics of Poverty Class

This paper analyzes the determinants of rural poverty and the characteristics of poverty class by using the raw data of 'Farm Household Economy Survey Report.' The poverty line was specified at 14.23 million won, which is 50% level of annual mean income. There is a significant difference of living standards between poverty and non-poverty classes. The poverty determinant function, estimated by using probit model, shows that sex and education levels are not significant determinants of poverty, but age is a significant determinant. As age increases, the probability to be in poverty class decreases, but after 54 years of age, the probability increases. And as land, agricultural fixed asset, and the other assets increase, the probability to be in poverty class decreases. Then the marginal effect of age to the probability to be in poverty class is estimated. For the people in the age of 60s, the marginal effect of age is 1.09%, but those in 70s, it is 2.59%. This finding implies that the probability to fall in poverty class increases rapidly as age increases. Moreover, decomposition of poverty class by age group, using poverty gap index, shows that the group of age 70s contributes 32.6% which is the biggest portion of rural poverty, even if its sample ratio is 15.2%.