This paper examines the implications for regional policy of new research on the role played by a failure in the ‘capacity to aspire’ [Appadurai, A. (2004), ‘The capacity to aspire’, in Rao, V. and Walton, M. (eds), Culture and Public Action, Washington, DC: World Bank.] in perpetuating disadvantage traps. After a brief review of the magnitude of the challenge that regional policy needs to confront, it provides a summary of the theoretical and empirical literature on poverty and aspirations failure (and the associated loss of agency, beliefs and self-efficacy). The key implication for the design of an inclusive regional policy is that it needs to address simultaneously the sources of external constraints (such as the availability of resources or adequate infrastructure) and mitigate the aspirations failure inherently linked to persistent disadvantage.

Many states are adopting economic education standards for the K-12 curriculum, mandating economic education courses in rural and urban schools. We examine economic education outcomes for rural and urban students using test scores gathered during a national high school academic competition and by estimating a production function for economic education. We find only limited differences between the education production function in urban and rural settings and lower average scores for rural students. To close this gap, results suggest that rural schools should place economic content in the senior-year curriculum and provide teachers with increased postgraduate training in economics.