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On The Empirical Finding Of A Higher Risk Of Poverty In Rural Areas: Is Rural Residence Endogenous To Poverty?

  • Fisher, Monica G.
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    Research shows households are more likely to be poor in rural versus urban America. Does this phenomenon partly reflect that people who choose rural residence have unmeasured attributes related to human impoverishment? To address this, two models are estimated using Panel Study of Income Dynamics data. A single equation Probit model of household poverty replicates the well-documented finding of higher poverty risk in rural places. However, a two-stage instrumental variables approach accounting for residential choice finds no measured effect of rural location on poverty. Results suggest failure to correct for endogenous rural residence leads to over-estimation of the "rural effect".

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    File URL: http://purl.umn.edu/18917
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    Paper provided by Oregon State University, Rural Poverty Research Center (RPRC) in its series Working Papers with number 18917.

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    Date of creation: 2004
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    Handle: RePEc:ags:osruwp:18917
    Contact details of provider: Postal: 200 Mumford Hall, University of Missouri, Columbia, Missouri 65211
    Web page: http://www.rprconline.org/index.htm
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    1. 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.
    2. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
    3. Daniel Aaronson, 1998. "Using Sibling Data to Estimate the Impact of Neighborhoods on Children's Educational Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 915-946.
    4. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October.
    5. Weber, Bruce A. & Jensen, Leif, 2004. "Poverty And Place: A Critical Review Of Rural Poverty Literature," Working Papers 18913, Oregon State University, Rural Poverty Research Center (RPRC).
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