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Urbanization and the Poverty Level

This paper analyzes the effect of urbanization on the poverty level. Our theoretical model suggests a U-shape relationship between the level of urbanization and poverty. Urbanization contributes to poverty reduction but at much higher levels, urbanization leads to increases in poverty. Empirically, we estimate the “optimal level” of urbanization by using: (i) an instrumental variable approach in the framework of the generalized method of moments and (ii) a dynamic panel analysis approach. We also investigate the robustness of the impact of urbanization on the poverty level by examining a variety of linkages. The empirical analysis covers different regions of the world to study whether the magnitude of the urbanization effects varies across regions. Our results support the hypothesis that there exists a U-shape relationship between the level of urbanization and the poverty level.

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0914.

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Length: 54 pages
Date of creation: 01 Dec 2009
Handle: RePEc:ays:ispwps:paper0914
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