Curing persistent poverty requires more social capital, not more federal grants, study suggests

"What does it take for a rural place to be economically vibrant?" the Daily Yonder asks, and answers: "Bowling centers help. Federal grants don't." Well, at least not the grants issued in 1990 to counties that were persistently poor in 1999. Those are among the mountain of data that two researchers used to find the causes of persistent poverty in the United States.

"Contrary to expectation, higher federal grant funding per capita tends to exacerbate rather than ameliorate poverty rates in a locality," the researchers write in the Journal of Socio-Economics. In a footnote, they say, "This suggests the possibility of reverse causality – that federal grants are directed more to poorer places." But statistical regression analysis, using the change in poverty rates between 1989 and 1999, "yields the same result, even when we control for initial poverty rates." Very intriguing and, as researchers often say, worth studying more.

The researchers are Stephan Goetz of Penn State and its Northeast Regional Center for Rural Development and Anil Rupasingha of the American University of Sharjah in the United Arab Emirates. They developed an index of social capital based on a county's number of bowling centers, public golf courses, membership clubs for sports and recreation, fitness centers, civic, business and social associations, religious, labor, professional and political organizations and tax-exempt, non-profit groups, as well as the percentage of eligible voters who voted in presidential elections and the county's response rate to the census.

"They found that rural places with more of these meeting places and organizations had lower levels of family poverty. Social capital seemed to reduce poverty in rural America. This wasn't true in the cities, where social capital had little effect on family poverty rates," Bishop writes. We still conder about cause and effect; the authors don't say whether they did a regression analysis to see if being poor discourages the development of social capital. But we do think persistently poor places need to think more about developing their social capital.

The study has many other facets; one is the effect of big-box stores. "The more big box retailers like Wal-Mart there are in a community, the higher the family poverty rate. Many rural communities try to attract big-box retailers. The two researchers conclude this strategy may be self-defeating," Bishop writes. The researchers note, "Jobs created by big box retailers are mostly low-paying jobs that may not help families escape from poverty, and these establishments tend also not to reinvest locally their profits earned."

The study report, titled "Social and political forces as determinants of poverty," was published last year in the Journal of Socio-Economics (Number 36, 2007, pages 650-671). For access, click here.