PERSISTENT AND TRANSITORY POVERTY ACROSS LOCATIONS IN THE UNITED STATES DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in the Graduate School of The Ohio State University By John M. Ulimwengu, MA **** The Ohio State University 2006 Dissertation committee: Approved by Professor David Kraybill Adviser Professor Tim Haab Graduate program in Agricultural, Environmental and Development Professor Elena Irwin Economics. ABSTRACT Poverty is often defined as lack of access to necessities such as food, shelter, and medical care. Adverse shocks such as income losses push households below the poverty line for a relatively brief period of time. Those who recover quickly without explicit external assistance are considered as transitorily poor. While households in transitory poverty are able to rebound relatively quickly from adverse shocks, those in persistent poverty remain poor for much more extended periods. Remedial policies for persistent poverty are different from those necessary to fight transitory poverty. Using a geocoded version of the National Longitudinal Survey of Youth 1979 (NLSY79), my findings suggest that the persistently poor receive less than 65% of their total income as wages, accumulate fewer assets, and rely heavily on government social transfers. Although their incomes fall below the poverty line occasionally, the transitorily poor stay above the poverty line most of the time. I confirm the presence of poverty clusters as well as the presence of spatial interaction across locations. This calls for cooperation among counties or states in the fight against poverty. ii I use a generalized mixed linear model that incorporates both fixed and random effects while controlling for individual characteristics and spatial attributes. I find that the persistently poor and the transitorily poor experience very different poverty paths. Years of education, labor market participation, and access to the benefit of economic growth are among the major factors explaining the difference in wellbeing between the two groups of poor households. Spatial attributes such as level of employment and population share of college graduates yield different returns in terms of wellbeing with respect to metro or nonmetro locations. The effect on wellbeing of both job-training programs and economic growth are consistently greater in metro areas than in nonmetro areas. In contrast to economic growth, the effects of job-training programs and human capital (population share of college graduates) are more pronounced in counties with low education, low employment, persistent poverty, and population loss. In metro areas, the effect of job-training, economic growth and human capital on household living standards decreases with respect to the population size. In nonmetro areas, the effect of an increase in the share of college graduates increases with the rurality of the location. The more rural the location, the greater is the effect of human capital on living standards. Overall, my findings support arguments in favor of policies that differentiate persistent poverty from transitory poverty. They also highlight the importance of spatial attributes in the fight against poverty. In the United States, antipoverty strategy revolves around the provision of safety nets to prevent entry iii into poverty and foster exit from poverty through job markets. This strategy is not sufficient for persistently poor households who remain in poverty because they are unable to self-finance investments needed to generate high returns from their assets. This category of dynamically poor households would benefit from strategies that enhance their capabilities to accumulate assets and transform them into entitlements through social, economic, cultural and political institutions in place. iv Dedicated to my Lord and Savior, Jesus-Christ, and my family v ACKNOWLEDGMENTS I wish to thank my advisor, David Kraybill, for academic and financial support, encouragement, and intellectual support which made this dissertation possible, and for his patience in correcting both my stylistic and scientific errors. I am grateful to Elena Irwin and Tim Haab for their insightful comments that helped to improve the quality of this dissertation. This research was supported by a fellowship from the Rural Poverty Research Center (RPRC) located at Oregon State University. I wish to extend my gratitude to Bruce Weber, the co-Director of RPRC for supporting this project. I am grateful to the National Longitudinal Surveys Program for granting access to the geocoded version of the National Longitudinal Survey Youth 1979. vi VITA January 18, 1965…………………………Born-Kisangani, Democratic Republic of the Congo 2002………………………………………M.A., Economics, The Ohio State University. 2001………………………………………M.A., Development Economics, Williams College. 1990………………………………………B.A., Mathematical Economics, University of Kinshasa. 2001-present………………………………Graduate Teaching and Research Associate, The Ohio State University. Publications Ulimwengu, J.M. and D. Kraybill. 2005. “Government Transfers and Poverty Transition in Metro and Nonmetro Areas,” selected paper presented at the American Agricultural Economics Association Annual Meeting, Providence, Rhode Island, July 24-27, 2005. Ulimwengu, J.M. and D. Kraybill. 2004. “Poverty over Time and Location: An Examination of Metro–Nonmetro Differences,” American Journal of Agricultural Economics 86 (5): 1282-1288. Ulimwengu, J.M. 2004. and G. Xiaoqi. 2004. “Modeling Spatial Accessibility within the Discrete Choice Framework,” selected paper presented at the American Agricultural Economics Association annual meeting in Denver, August 1-4, 2004. vii Ulimwengu, J.M. 1998. “Comment les kinois perçoivent-ils la pauvreté? ” Congo-Afrique, November 1998. (English title: Perceptions of Poverty of Kinshasa Residents). Ulimwengu, J.M. 2001. Choice of Exchange Rate Regime, Master Thesis, May 2001, Williams College (USA). Ulimwengu, J.M. and N. Nzinga. 1999. “La persistance de la dollarisation au Congo-Kinshasa : Manifestation de la substitution ou de la complémentarité monétaire? ” Cahiers Economiques & Sociaux, Vol. XXV, N°1, April 1999, PUC. (English title: Persistence of Dollarization in Congo-Kinshasa: Manifestation of Monetary Substitution or Complementarity?). Ulimwengu, J.M. 1997. “Comité de Politique Economique et Sociale, réformes structurelles et développement humain au Zaïre,” Zaïre- afrique, March 1997. (English title: Committee of Social and Economic Policy, Structural Reform and Human Development in Zaire). FIELD OF STUDY Major Field: Agricultural, Environmental and Development Economics viii TABLE OF CONTENTS ABSTRACT............................................................................................................ ii ACKNOWLEDGMENTS ..................................................................................... vi VITA..................................................................................................................... vii LIST OF TABLES................................................................................................ xii LIST OF FIGURES .............................................................................................xiii LIST OF MAPS .................................................................................................... xv LIST OF DIAGRAMS......................................................................................... xvi CHAPTER 1 ........................................................................................................... 1 INTRODUCTION .................................................................................................. 1 1.1. Background.................................................................................................. 1 1.2. Research Statement...................................................................................... 6 1.3. Objectives .................................................................................................... 7 1.4. Hypotheses................................................................................................... 7 1.5. Methods........................................................................................................ 8 1.6. Data.............................................................................................................. 9 1.7. Contribution to the literature...................................................................... 10 1.8. Overview of this dissertation ..................................................................... 11 CHAPTER 2 ......................................................................................................... 12 LITERATURE REVIEW ON POVERTY ANALYSIS ...................................... 12 2.1. Introduction................................................................................................ 12 2.2. Poverty theories ......................................................................................... 13 2.3. Measuring poverty ..................................................................................... 16 2.4. Dynamic poverty analysis.......................................................................... 19 2.5. Spatial analysis of poverty......................................................................... 23 2.6. Welfare and poverty................................................................................... 27 CHAPTER 3 ........................................................................................................