On Persistent Poverty in a Rich Country

February 26, 2019

Key Takeaways

Together, historical and contemporary human capital explain over half of the overall income gap between persistently poor and non-poor counties.

Persistently poor counties are different (and poorer) primarily because they have lower levels of production and education, and not because they use the resources they have less efficiently.

Since 1960, poverty rates across the United States have decreased dramatically, but some areas have remained persistently poor. 

Using a county-level data set linking 19th century Census data with contemporary data, Gatton economics professor Jenny Minier and co-authors examined those counties and compared them to others that have managed to escape poverty, with the goal of determining what explains this difference and why certain regions have remained persistently poor. 

According to the paper’s abstract, these so-called persistently poor areas are defined as having county poverty rates in excess of 20% since 1960. These areas encompass five distinct regions and 11% of all U.S. counties: Appalachian Kentucky, the “Black Belt” region spanning the Carolinas to Alabama, the Mississippi Delta region, the Texas “colonias” along the Rio Grande River, and Native American reservations in the four
corners states and the Dakotas.

“In this study, we're using some fairly modern data, from 1960 through 2000, but then we wanted to merge that with data from the late 19th century so that we could see some of the long-term effects of education, geography, climate, dating back about a century,” explained Minier, who serves as director of the Center for Business and Economic Research (CBER).

Minier and her co-authors identified the counties that have been persistently poorer than others and looked for ways to explain today’s income gap between them. Out of that income gap, which is about $4,000 per person, more than half is explained by differences in levels of education – both current and historical. This research shows that persistently poor counties are different (and poorer) primarily because they have lower levels of production and education, and not because they use the resources they have less efficiently.

“I think lot of times when we think about trying to help poor areas, we think about doing things to attract businesses to the area, or other immediate policies where we might actually see something happen next year or right away,” she said. “You don't see the returns from education as quickly, but they're very important. And it seems to be one of the best ways to help the poor.”

Minier hopes that her work will inform policy decisions about what the poor counties might do to improve standards of living there, and that those actions will help break the cycle of poverty that so much of our country experiences. 

On Persistent Poverty in a Rich Country

Authors:

Jenny Minier, Sturgill Professor; Director of the Center for Business and Economic Research, Gatton College of Business and Economics at the University of Kentucky

James Ziliak, Gatton Endowed Chair in Microeconomics; Director of the Center for Poverty Research; Executive Director of the Kentucky Federal Statistical Research Data Center

T. M. Tonmoy Islam, Elon University

Publication:

Southern Economic Journal, Vol. 81, Issue 3, pages 653-678, January 2015

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