Three Essays on Welfare and Development Economics: A Place Based Approach

Abstract

The thesis contains three essays on development and welfare economics. The first essay investigates the relationship between economic growth, income inequality and absolute poverty (those living on less than $1 per day) using data from 56 developing countries in Africa, Asia and Latin America. In doing so, I first address the two-way causality relationship between growth and inequality. Consistent with previous studies on income inequality and growth in developing countries, I find that higher initial income inequality retards growth. In addition, I find that quality institutions have higher explanatory power than geography and climate. Using Geographic Weighted Regressions scheme this essay also finds evidence that growth is the central driving factor in reducing poverty and income inequality has a positive association with poverty. Besides, both the partial elasticity of poverty to growth and inequality exhibit significant systematic geographic variation across countries. The second essay examines the regional variation in local poverty for nearly 2,400 rural and urban Canadian communities using 1981-2001 Census data. In doing so, three different measures of poverty are used to examine the response of local poverty to changes in local economic and demographic attributes. These measures of poverty include: average economic family’s poverty gap, local poverty rate (LICO rates) and per capita poverty gap levels. By employing fixed effect panel data estimation technique, I find that local economic/ labor market conditions have greater impacts in explaining the regional variation in poverty gap and incidence levels across communities. However, the response of the family poverty gap to changes in labor market conditions is higher compared to poverty incidence or per capita gap levels. On the other hand, individual poverty gaps are shaped mostly by community demographic structure. Therefore, I find that using different types of poverty measurements results in drawing slightly different conclusions on the relationship between local attributes and the poverty-level outcome. Finally, the third essay analyzes the nature, magnitude and direction of labor market responses and wages across Canadian communities in relation to job creation and accessibility. In particular, this study explores whether better employment access (geographic proximity) will improve labor market outcomes for low-wage earning rural and urban Canadians by giving special attention to communities with greater concentration of recent immigrants and Aboriginal Canadians. First, it finds that better job-access is inversely related to the proportion of workers who are low wage earners (those with hourly wage less than $10 per hour). This relationship is stronger in rural communities; however, in urban areas prevalence of low-wage earners has no association with job access. Human capital plays a prominent role in urban areas. Nonetheless, it finds evidence that urban communities with higher shares of recent immigrants have positive association with low wage share even after controlling for human capital and other factors.