Question

How can people escape the poverty trap without necessarily migrating to the cities where industries are concentrated?

People are most likely to be attracted to certain cities that offer better job opportunities and income. According to Moretti, these cities are few, yet they have the concentration of most industries. The local ecosystem for most people is not usually conducive and does not lead to better opportunities for locals. A deeper understanding of how innovation clusters are established is key to coming up with solutions to solve the problem of migration to innovation clusters. While this is a difficult process, it will help provide insights as to whether people can escape the poverty trap, and whether this can be achieved within the local ecosystems. Moretti highlights various ways the clusters are established and one way is to locate their business operation near top academic institutions. Struggling communities have to reinvent themselves and only then shall they start the process of avoiding the poverty trap.

Answer 1

Ans) Poverty trap is a cycle which forces an individual to remain poor. It is mostly due to lack of capital and credit in rural or underdeveloped regions. In order to escape this cycle many people migrate to industrial cities for better job opportunities.

Some methods to escape the poverty trap without migrating are:-

1) Reducing costs-

The people of the underdeveloped region must seek a method to ensure low cost of production on all their goods and services produced, be it food grains, agricultural goods, education or healthcare. This will ensure reduction in the price of all goods produced by them which will ultimately lower their expenses and increase purchasing power or real income of all individuals.

2) Pursue Higher Education-

It is a highly effective method for breaking the cycle. Graduating from college itself may double the life earning expectancy of an individual. Greater knowledge prevents others from taking advantage of the individual. Being educated about current prices enables one to save money and also get the best product.

3) Being Aware of Rights-

As a consumer and debtor ( in case of loans), the individual of the underdeveloped region must be aware of his or her rights. In case of violation of any consumer rights, a protection beareu can be moved. These beareus exist to make sure that all sellers, banks, financial companies, etc deal fairly with the customers.

4) Creation of Capital-

As an individual in an underdeveloped region means to raise capital and finding sources for funds to start a business can be difficult. Reducing personal expenses and seeking loans with the lowest possible rate of interest can help raise repayable capital.

5) Maximum Utilisation of Resources-

Making optimum and judicious use of available resources is the best resort for an individual with difficulty in raising capital for starting business and stuck in the poverty trap. Use all available human and material resources to ensure the lowest cost of production for the final product.