Place-Based Policy and Rural Poverty: Insights from the Urban Spatial Mismatch Literature

Abstract

Unless there are spatial barriers that limit adjustment, economists argue that policies to alleviate poverty should focus on poor people, not poor places. Akin to urban spatial mismatch hypotheses, we develop a distance-based friction explanation of higher rural poverty. Empirical examination of US poverty supports these frictions as partly underlying higher rural poverty. This follows from assessing the relationship between poverty and remoteness as well as labour supply responses. Higher rural poverty does not appear to be a simple result of the poor self-selecting to live in remote areas. The results suggest that place-based anti-poverty policies may be beneficial.

Keywords: place-based policy, rural poverty, economic development policy, spatial mismatch, rural-urban spillovers

JEL Classification: R12, I32, R23