The Role of Human Capital Factors on Poverty in Informal Settlement: Informal Settlement of Sheikh-Hasan, Mashhad City, Iran

Abstract

This paper investigates the determinants of multi-dimension poverty in informal settlements of Mashhad City. It specially analyzes human capital factors, among factors that influence poverty level. Education, skills, experience and knowledge have important role in promoting income level and in access to sustainable jobs, especially in informal settlements that have lower human capital level than the urban areas other. Mashhad city has most marginal settlements in Iran. Sheikh-Hasan Neighborhood in Mashhad Municipality region 4 has been selected as case study. This study is based on information gathered from household level in 2016 and the ordered logit model is employed to estimate factors influencing urban poverty. Data were obtained from 300 households using the questionnaire Through the Systematic Random technique. Calculation of poverty indexes reveals that nearly 87% of households are below absolute poverty line and 20% of households are below extreme poverty line. Marginal effects show variables of “job stability”, “Ownership”, “Household size” and “Education of household head” have the greatest impact on poverty alleviation. Also, variables of “Education level” and “highest level of education of household members” have positive effect and significant on poverty. Results represent that poverty in informal settlements of Mashhad is strongly linked to factors such as human capital. In addition, with increasing the level of knowledge of household heads and creation of favorable conditions for increasing of the education level of household members can reduce poverty.