On the Empirical Finding of a Higher Risk of Poverty in Rural Areas: Is Rural Residence Endogenous to Poverty?

This section includes: On the Empirical Finding of a Higher Risk of Poverty in Rural Areas: Is Rural Residence Endogenous to Poverty?:COMMENT, by Thomas A. Hirschl; On the Empirical Finding of a Higher Risk of Poverty in Rural Areas: Is Rural Residence Endogenous to Poverty?: REPLY, by Monica Fisher. Research shows people 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 question, two models are estimated using Panel Study of Income Dynamics data. A single equation Probit model of individual poverty replicates the well-documented finding of higher poverty risk in rural places. However, an instrumental variables approach, accounting for correlation between rural residence and the poverty equation error term, finds no measured effect of rural location on poverty. Results suggest failure to correct for endogeneity or omitted variable bias may overestimate the "rural effect.