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Formation of Aspirations
 

Formation of Aspirations

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  • Ethiopian households’ average expenditure pattern – stimulants vs. human capital - 2-4 times (HICE of 1995/96, 1999/2000, and 2004/05); Fatalism General - lack of proactive and systematic effort to better one’s own life (consistent with the language of the poor); Economic perspective - making the ‘investments to better one's life’.

Formation of Aspirations Formation of Aspirations Presentation Transcript

  • Formation of Aspirations – An Empirical Analysis Tanguy Bernard, Stefan Dercon, Fanaye Tadesse, Alemayehu Seyoum Taffesse , Ibrahim Worku Presentation at ESRC-CAGE Workshop on Inequality University of Warwick 6 July 2011
  • Motivation
    • Development discourse and praxis focus on ‘ opportunities ’
    • Why do the poor not ‘invest’?
      • Ethiopians and fatalism?
    • A variety of mostly complementary explanations have been forwarded over the years.
      • Low returns to investments – Example: no schools, lack of credit (market failures);
      • Unexploited opportunities due to lack of information/knowledge about the opportunities/returns – Example: insufficient observable cases;
      • Social constraints dampen the economic attractiveness of investment opportunities – Example: egalitarian norms, very high taxation, excessive regulations’
    08/24/11
  • Motivation
      • Focus - ‘ external circumstances ’ and ‘ opportunities ’,
      • Constraints associated with the manifested attributes of decision makers
        • Identity issues : People’s choices are conditioned by their sense of self – Example: stereotype roles;
        • Psychological issues : impatience, commitment, and psychological barriers and similar reasons identified by the behavioural economics literature – Example: loss aversion and the consequent preference for the status quo;
    08/24/11
  • Motivation
      • The present study adopts the aspirations failure approach which:
      • espouses a perspective akin to the fourth set of explanations outlined above;
      • attempts to blend external constraints that the poor face with the potential effect these constraints may have on the internal logic governing choice by them;
      • affords an alternative characterisation of what appears to be fatalism (Ethiopia)
    08/24/11
  • Elements of the Aspirations Perspective
    • What are Aspirations?
      • Aspirations have two distinctive aspects:
        • Future-oriented - are goals that can only be satisfied at some future time (differ from immediate gratifications);
        • Motivators - are goals individuals are willing, in principle, to invest time, effort or money in to attain (different from idle daydreams and wishes)
      • Note: the ‘willingness to invest’ is ‘potential’, or ‘conditional’
      • Ref: Simon (1977), Selten (1999), Appadurai (2002), Ray (2003)
    08/24/11
  • Aspiration window Aspiration level and gap Aspiration failure Aspired Gap Efforts to improve Attained Well-being Perspectives Fatalism; Self efficacy; Aspirations Failure;
  • Step 1: Correlations Step 2: Measurement Step 3: Treatment Step 4: Experiment Step 5: Replications Research program
  • Baseline survey (Aspiration and VSLA)
    • Treatment
    • 3 types of treatment
      • Documentary
      • Placebo
      • Control
    • 2 levels of treatment
      • Village-level
      • Household-level
    Follow-up survey ( ∆ Aspiration and ∆ VSLA)
  • On going experiment
  • Aspiration formation – A simple formulation
    • Central Proposition: ((Bandura (1993, 1994) in psychology, Appadurai (2001) in sociology , Ray (2006) in economics):
    • Aspirations reflect:
      • an individual’s aspiration window – peers and economic opportunities of the local environment
      • An individual’s own characteristics and past experience including shocks;
    • Reduced form:
  • Data - ERHS Survey Rounds
    • Spatial coverage: 15 Kebeles (villages);
    • Temporal coverage: 1993/94-2008/9 (7 rounds the last three roughly one every 5 years)
  • Wealth Aspiration - Data
    • Round 7 Question: We would now like you to think of your own wealth. Thinking of a scale from 1 (the lowest or worst level) to 10 (the highest or best level):
    • Q39a. At what level do you believe you are currently ?
    • Q39b. At what level would you like to be?
    • Estimation
    • Use responses to Q39b as the dependent variable;
    • Responses to the wealth aspiration question are ordered - ordered probit model.;
    • Clustered and robust standard errors
  • Variables – All survey rounds Wealth Aspiration Level of wealth the respondent would like to achieve (measured using a 10-point scale) Age Respondent's age in number of years Age squared Respondent's age in number of years (squared) Gender (male=1) Gender of respondent Non-farm activities (yes=1) Dummy - the respondent engages in non-farm activities (Yes=1) Iddir (member=1) Dummy - the respondent is a member of an Iddir (funeral association) (Member=1) Married (yes=1) Marital status of the respondent (married=1) Shock Shock faced by respondent in round 7 - index calculated using principal components Neighbourhood size Number of neighbours within a radius of 500m from the respondent's residence Average income growth of neighbours (round7-round6) Average growth in the real consumption per capita (in 1994 prices) of the respondent's neighbours between Rounds 6 and 7 (%). Income growth (round 2 - round 1) - Income growth (round 7 - round 6) Growth in the real consumption per capita (in 1994 prices) of the respondent's household between successive survey Rounds (%) Poor Number of rounds the respondent's family was poor (using the poverty line in 1994)
  • Marginal (Partial) Effects – All Rounds Note : Figures in red are statistically significant at least at 10% level of significance. dy/dx per one SD change (%) Married (yes=1) Average income growth of neighbors (R6-R7) Income growth (R6 – R7) Income growth (R5–R6) Poor Pr(Wealth Aspiration = 1) -0.25 -0.13 -0.09 -0.10 0.18 Pr(Wealth Aspiration = 2) -0.60 -0.34 -0.23 -0.26 0.31 Pr(Wealth Aspiration = 3) -1.50 -0.89 -0.60 -0.68 0.83 Pr(Wealth Aspiration = 4) -2.01 -1.27 -0.86 -0.96 1.17 Pr(Wealth Aspiration = 5) -2.73 -1.83 -1.24 -1.37 1.70 Pr(Wealth Aspiration = 6) -2.08 -1.56 -1.07 -1.18 1.45 Pr(Wealth Aspiration = 7) 0.15 -0.21 -0.14 -0.16 0.19 Pr(Wealth Aspiration = 8) 9.01 6.50 5.37 5.97 -5.84 Mean (SD) -18.2 (32.5) -18.3 (53.7) 2.2 (59.7) 2.8 (1.8)
  • Variables – Rounds 6-7 Wealth Aspiration Level of wealth the respondent would like to achieve (measured using a 10-point scale) Age Respondent's age in number of years Age squared Respondent's age in number of years (squared) Gender (male=1) Gender of respondent Non-farm activities (yes=1) Dummy - the respondent engages in non-farm activities (Yes=1) Iddir (member=1) Dummy - the respondent is a member of an Iddir (funeral association) (Member=1) Married (yes=1) Marital status of the respondent (married=1) Shock Shock faced by respondent in round 7 - index calculated using principal components Neighbourhood size Number of neighbours within a radius of 500m from of the respondent's residence Log of asset value Logarithm of the value of assets (including farm implements, furniture, jewelry) the respondent’s household owned in survey round 7 (2008/09) Log of average asset value of neighbors Logarithm of the average value of assets owned by the respondent's neighbours (residents within 500m radius of the respondent's house) excluding the respondent’s household
  • Marginal (Partial) Effects – Rounds 6-7 Note : Figures in red are statistically significant at least at 10% level of significance. dy/dx per one SD change (%) Gender (male=1) Log of asset value Log of average asset value of neighbors Pr(Wealth Aspiration = 1) 0.01 -0.04 -0.04 Pr(Wealth Aspiration = 2) 0.01 -0.04 -0.04 Pr(Wealth Aspiration = 3) 0.05 -0.12 -0.10 Pr(Wealth Aspiration = 4) 0.11 -0.30 -0.34 Pr(Wealth Aspiration = 5) 0.30 -0.85 -1.02 Pr(Wealth Aspiration = 6) 0.45 -1.34 -1.43 Pr(Wealth Aspiration = 7) 0.74 -2.20 -2.45 Pr(Wealth Aspiration = 8) 0.74 -2.07 -2.45 Pr(Wealth Aspiration = 9) 0.18 -0.50 -0.57 Pr(Wealth Aspiration = 10) -2.63 7.44 8.51 Mean (SD) 7.1 (1.2) 7.7 (0.7)
  • Observations
    • Tentative Linkages
      • Poorer individuals seem to have lower aspirations;
      • Low aspirations can perpetuate poverty and inequality;
      • Individuals with low aspirations appear to have limited exposure to the ‘rest of the world’;
      • Low aspirations can perpetuate marginalization.
    • Next (on-going) Steps
      • Estimate a generalized threshold model;
      • Produce impact estimates