Three essays on regional economic development and local determinants of poverty

This work focuses on several important issues of regional development, poverty, and public policy. It consists of three essays. The first essay examines the relationship between the characteristics of small communities in Michigan and variation of poverty rates across the State. The poverty model is based on the production behavior of community residents. It is estimated using the Census 2000 data. The difference in regional poverty rates is explained primarily by variation in the quality and quantity of community labor supply. Significant differences are detected among rural, metropolitan and metropolitan adjacent communities. Also, higher poverty rates in rural areas tend to persist over time, implying that urban and rural poverty should be treated with separate policies.;The second essay analyzes the impact of economic development policies and highway infrastructure improvements on growth of per capita income and jobs in Michigan counties. The policies considered for analysis have significant impact on growth outcomes. However this effect is non-linear. Significant heterogeneity in policy effects is also detected. The impacts are different with respect to average income level in a county as well as between metro and non-metropolitan areas. In addition, cross-policy effects are found. The study uses improved measurement of policy treatment while accounting for possible spillover effects.;The third essay analyzes the relationship between local economic growth and the distribution of businesses across size categories. The distribution is measured by the employment share in businesses of various sizes and by a business distribution index. The index provides a measure of the extent to which the local economy deviates from an equal employment share in each of nine business size categories. Strong links between a county's business size distribution and its economic growth are found. There is also a difference between the optimal income and job growth enhancing distributions. The results also indicate that the optimal growth-enhancing distribution of employment has a higher share of the smallest businesses (with 1 to 4 employees) than it is currently the average. In summary, the results support increased policy emphasis on encouraging small business start-ups and development. However, the optimal development strategy depends on the initial distribution of businesses within a local economy.