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Poverty in Michigan Small Communities

Demand Versus Supply of Labor

Kyiv Economic Institute and Kyiv School of Economics, Kiev, Ukraine, nizalov{at}kse.org.ua

A. Allan Schmid

Michigan State University, East Lansing, schmid{at}msu.edu

This article assesses the effect of labor demand and labor supply conditions on distribution of poverty across small communities in Michigan. The poverty model used for the analysis is based on the production behavior of the communities' residents, and is estimated using Census 2000 data. The difference in regional poverty rates is explained primarily by variation in the quality and quantity of communities' labor supply. Significant differences among rural, metropolitan, and metropolitan-adjacent communities are detected in determinants of poverty. In particular, a weak labor demand contributes to higher rates of rural poverty. Moreover, poverty rates are more persistent in rural areas and small towns. A higher average age of labor force is associated with a decrease in poverty rates. However, this effect becomes evident only after the ages of thirty-five to thirty-seven in rural areas, implying a slower accumulation of experience than in urban areas. Results imply that urban and rural poverty should be treated with area-specific policies that accommodate the difference in sources of poverty.

Key Words: poverty • rural and urban difference • spatial aggregation

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