Three essays on location and household welfare

The underlying theme connecting my three chapters is the importance of location in influencing the dynamics of household welfare.;My first chapter, Rural-Urban Migration and the Intergenerational Transmission of Wealth, explores the various channels by which rural-urban migration affects the intergenerational transmission of wealth in the rural region. I incorporate rural-urban migration, human capital externalities, and regional agglomeration effects into Galor and Zeira's (1993) overlapping generations model. I formalize the conditions that may induce a rural brain-drain and explore the welfare impacts of various person-based and place-based policies under different goods and housing production technologies. Simulations of the model show that for less fluidity in substitution between capital and land in housing technology, well-intended person-based policies such as education subsidies directed towards poorer rural households may distort incentives to migrate to the more productive region. However, the person-based policy does reduce inequality in the rural region and prevents households from falling into a poverty trap. On the other hand, the person-based policy facilitates migration to the city when there is greater technical substitutability in housing production. In the case of place-based policies, where tax revenues are invested in enhancing rural firm productivity, the benefits of the policy may not trickle down to the poorest rural households in the absence of substantial gains in productivity. Average rural household welfare is higher when a place-based policy is implemented but some households may still fall into a poverty trap.;My second chapter, Mobility and Poverty: The Impact of Population Change and Assisted Migration on Household Consumption Growth in Indonesia, evaluates the impact of village population changes and the transmigration program on household productivity in Indonesia using the Indonesian Family Life Survey. The stated goal of the transmigration program was to achieve more balanced regional development by shifting people from the crowded island of Java to the less populated outer islands. I first address possible endogeneity arising from the selection of transmigration sites in a model of household consumption growth by instrumental variables estimation. The initial IV estimation suggests that growth in village population is positively and significantly associated with household consumption growth, while the level of population is negatively associated with consumption growth. I further address the possibility that population change may be endogenous if community demand shocks correlated with higher productivity attracted households to the community. When population change is instrumented for, in addition to transmigration, the estimates for population increase and population levels cease to be significant. In terms of policy recommendations, the results do not indicate any benefits from transmigration, but they neither provide any evidence to substantiate the claims made by opponents of the program.;The third chapter, Is It Harder for Rural American Families to move up the Intergenerational Economic Ladder, is a preliminary analysis of how location affects intergenerational mobility of children from rural American households. Estimates of the intergenerational earnings elasticity have ranged from 0.3 to 0.6 in North American and European studies. I use wealth data from the U.S. Panel Study of Income Dynamics to explore whether children of parents who lived in a rural county are more tied, as adults, to their parent's wealth than children from suburban or urban families. OLS estimates show that economic status is significantly more persistent for families who lived in a rural county that was not adjacent to a metropolitan region. Since average rural household earnings are below the national average, our results suggest that the economic status of these families will converge more slowly to a higher welfare steady state than that of their urban and suburban peers. A higher intergenerational elasticity for children from rural families implies, if trends remain constant, a longer period of time before the income inequality gap is bridged across the US landscape, and reinforces the argument for place-based poverty alleviation policy. We also use Instrumental Variables estimation to mitigate the downward bias in estimates of the intergenerational wealth elasticity that may arise from measurement error in parent's wealth. When location controls are included in the second stage IV regression, the coefficients on the interaction terms between location and the log of parent's wealth no longer remain significant. Our dataset included only rural counties in 1989. Further analysis with more rural observations may provide a more robust inference of the persistence of wealth in rural America. 48 observations, or between 3 and 5 percent of the sample, for parents who lived in rural counties in 1989. Further analysis with more rural observations may provide a more robust inference of the persistence of wealth in rural America. (Abstract shortened by UMI.)...