Modelling local spatial poverty traps in England

Abstract

This paper considers how local areas become stuck in poverty traps and develops models exhibiting thresholds, where deprivation has to fall to a certain level before taking off. Using aggregate data for local authorities, the paper models cross-section movements of house prices to identify the threshold level of poverty. The paper argues that the resource requirements for bringing the most deprived areas to the take-off point are likely to be high. But for areas that are already close to the threshold, regeneration can be successful. Therefore, identifying the thresholds is important. Testing for thresholds is not straightforward, but the paper provides empirical evidence. The implications for policies concerned with social mixing are not encouraging. However, mixing may be more successful in areas that lie close to the threshold. For example, few high-income households want to live in the most deprived areas if the expected capital gains are low. But capital gains are maximised close to the take-off points.