Subject: CRIS
Send reply to: kilkenny@iastate.edu
Date sent: Tue, 9 Jan 2001 13:27:02 -0600


Title: Rural Economic Development: Alternatives in the New Competitive Environment

41. This year's work continues to address Objective 3 of the NE-
162 Regional Project "Rural Economic Development: Alternatives in
the New Competitive Environment." Objective 3 is to "Identify
changing public policy initiatives and relationships and their
impacts on rural economies and governments and investigate the
effectiveness of alternative policy instruments to affect rural
economic and fiscal viability and structure."

This year we have made progress on two fronts. One, we have estimated a bivariate binomial probit model of the discrete choices to work or not, and to participate in welfare programs or not. Raw data show that non-metro households work significantly more, and participate in welfare significantly less than metro households. The Oaxaca decomposition technique is applied to show the contributions of different characteristics versus different behavior of the two subpopulations.

Two, we have estimated the probability distributions of program participation choice for eight household types for the computable general equilibrium model. This model is specifically designed to simulate the effects of changes in the economy on welfare and food stamp program participation, and the effects of changes in the programs on the economy.

42. Impact: The functional forms and structure of the computable general equilibrium model are innovative. The validity and predictive power of the new approach, however, can only be shown with the passage of time.

If in fact the new computable general equilibrium model structure developed this past year proves to be a valid analytical tool for analysis of welfare reforms and the impacts of changes in local economic activity on public safety net program budgets, this research will help public agencies budget most efficiently for contingencies. The potential beneficiaries include citizens as taxpayers-- insofar as the same amount of government revenue may be allocated to achieve better results; and as business people, employers, and service providers.


43. Publications:Kilkenny, M., H. Jensen, S. Garasky, and J.
Olmstead. 2000. Welfare and Food Assistance at the State and
Substate Level: A Framework for Evaluating Economic and
Programmatic Changes. American Journal of Agricultural
Economics 82(3):649-655.