An economic analysis of the relationship of poverty and income inequality in rural West Virginia

There have been numerous research studies on poverty, income inequality, economic growth, and the relationship between these variables at national and regional levels. This thesis focuses on poverty and income inequality, in 38 rural counties of West Virginia. The study examines the possibility of simultaneity between poverty and income inequality (Gini index) using a two-stage least square regression with cross-sectional data for 1980 and 1990. Furthermore, ordinary least square regressions are used to investigate the main determinants of poverty and income inequality. The results confirm the possibility of simultaneity between poverty and income inequality. The proportions of the population in welfare, the proportion of population of age 65 or older, the proportion of female-headed households, the proportion of people unemployed, and the level of inequality (Gini index) contributed the most to increased poverty levels. The proportion of employment shares in finance, insurance and real estate, and per capita income contributed to reduced poverty levels. Poverty level is a main determinant of increased levels of income inequality. Per capita income, the proportion of human capital stock (educational attainment level), and the proportion of employment shares in manufacturing contributed to reduce income inequality.