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What is low level equilibrium trap?

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What is low level equilibrium trap?
  • 1 answers

Yogita Ingle 6 years, 4 months ago

Nelson has presented the theory of low-level equilibrium trap  for the UDCs. This theory is based upon 'Malthus' view that when per capita income of a country rises above the 'Minimum Subsistence Wage', the population will tend to increase. Initially, the population grows rapidly with an increase in per capita. But when the growth rate of the population reaches an upper physical level, it starts declining with a further increase in per capita.
In other words, in the beginning, the increase in per capita income leads to an increase in the population. Afterward, the increase in the per capita income leads to decrease population.
According to Nelson, the UDCs have a stable equilibrium of per capita income which is close to subsistence requirements. Hence, savings and investment remain at a very low level. Thus whenever, the efforts are made to raise the level of NI, savings, and investment they also resulted in an increase in the population. Accordingly, the per capita income remained at its stable equilibrium level. All this means that UDCs are caught in a low-level equilibrium trap.

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