Income and Poverty across SMSAs: A Two-Stage Analysis

Two popular explanations of urban poverty are the "welfare-disincentive" and "urban-deindustrialization" theories. Using cross-sectional Census data, we develop a two-stage model to predict an SMSAs median family income and poverty rate. The model allows the city's welfare level and industrial structure to affect its median family income and poverty rate directly. It also allows welfare and industrial structure to affect income and poverty indirectly, through their effects on family structure, education, and employment. The results give limited support to both the welfare-disincentive and urban-deindustrialization explanations of urban income levels and poverty rates.