Road to nowhere: RDP houses outside Kokstad, South Africa (Rhodes University) Escaping poverty is one of the most difficult things to do, especially in a country like South Africa where at least a quarter of the labour force is unemployed. Every year, thousands of young rural men and women move to the urban periphery in search of jobs and a better life for their children. They mostly end up in townships on the fringes of South Africa's largest cities where the lack of services – housing, water and sanitation, education and health – are unlikely to allow them to escape the poverty they so desperately hope to. Their children, in all likelihood, will remain on the fringes of the formal economy, unable to break free from the poverty trap. How to solve the immobility of the poor is one of the most vexing questions that captivate economists. What are the policy levers that we can pull to allow a poor household migrating from Qunu to Cape Town to build a better life for their children? One might think of a plethora of policy options: more housing, clinics and sports fields, better sanitation, teachers and public transport, safer streets, classrooms and public parks; in short, all the things we associate with better neighbourhoods. But better neighbourhoods are highly correlated with high incomes, and it is difficult to know which comes first: do rich people create better neighbourhoods, or do better neighbourhoods create rich people? Two Harvard economists have recently provided the most compelling evidence to date to show that it is neighbourhoods that, in fact, create rich people. They track the participants of a lottery programme in the USA that allowed some families – those that were lucky to win the lottery – to migrate to better neighbourhoods. Because it was a lottery programme, selection is not an issue, meaning they can interpret the difference between those that migrate and those that stay behind as the causal impact of the new neighbourhood. Here they summarize their results:
On the road to riches
On the road to riches
On the road to riches
Road to nowhere: RDP houses outside Kokstad, South Africa (Rhodes University) Escaping poverty is one of the most difficult things to do, especially in a country like South Africa where at least a quarter of the labour force is unemployed. Every year, thousands of young rural men and women move to the urban periphery in search of jobs and a better life for their children. They mostly end up in townships on the fringes of South Africa's largest cities where the lack of services – housing, water and sanitation, education and health – are unlikely to allow them to escape the poverty they so desperately hope to. Their children, in all likelihood, will remain on the fringes of the formal economy, unable to break free from the poverty trap. How to solve the immobility of the poor is one of the most vexing questions that captivate economists. What are the policy levers that we can pull to allow a poor household migrating from Qunu to Cape Town to build a better life for their children? One might think of a plethora of policy options: more housing, clinics and sports fields, better sanitation, teachers and public transport, safer streets, classrooms and public parks; in short, all the things we associate with better neighbourhoods. But better neighbourhoods are highly correlated with high incomes, and it is difficult to know which comes first: do rich people create better neighbourhoods, or do better neighbourhoods create rich people? Two Harvard economists have recently provided the most compelling evidence to date to show that it is neighbourhoods that, in fact, create rich people. They track the participants of a lottery programme in the USA that allowed some families – those that were lucky to win the lottery – to migrate to better neighbourhoods. Because it was a lottery programme, selection is not an issue, meaning they can interpret the difference between those that migrate and those that stay behind as the causal impact of the new neighbourhood. Here they summarize their results: