WEBINAR: Aspirations, trust, and poverty reduction

1. PIM Webinar: Aspirations, Trust, and Poverty Reduction Katrina Kosec Senior Research Fellow IFPRI December 19, 2018

2. Focus: The Psychological Costs of Poverty • Experiencing poverty and economic vulnerability is closely linked with two negative and costly psychological phenomena: 1) Having low aspirations, or ambitions, for the future (Kosec and Mo 2017) 2) Having low levels of trust or confidence in one’s government (Kosec and Mo 2018; Evans et al. 2019) • Why is it important to take these tolls into account, and what can policymakers do to reduce any negative effects?

3. Outline of the Talk 1. Discussion of why psychological outcomes like aspirations and trust are so important 2. Evidence on the relationship between poverty and economic vulnerability and these psychological outcomes 3. Discussion of the ability and role of policy for addressing any negative psychological impacts of poverty and economic vulnerability

4. What are Aspirations? • Aspirations are individuals' goals for the future • All individuals have aspirations about various ‘domains’ in their life • Domains commonly examined include household income, household asset wealth, educational attainment, social status, and security • Citizens with high aspirations “visualize the future and engage in forward-looking behavior” (Dalton, Ghosal, and Mani, 2015)

5. Typical Domains of Aspirations: Five Considered by Kosec et al. (2018) Income Asset wealth Social status Education for children Security

6. Share of 100 Units of Local Currency That Adults Surveyed as part of the 2016 Life in Kyrgyzstan Survey Placed on Each Domain (Kosec et al. 2018)

7. How Are Aspirations Formed? • Aspirations are largely socially determined; individuals form aspirations by observing those in their ‘cognitive window’ (Genicot and Ray 2017) • But there is no single determinant; influenced by external factors and internal, cognitive processes (Ray 2006) • Social circle, interactions with community and government, life experiences, personality, awareness, perception, reasoning, and judgment

8. Policymakers Can Move Aspirations! • A number of development interventions have been shown to raise aspirations— often by: • Exposing individuals to role models (Beaman et al., 2012; Bernard et al., 2014, 2015; Riley, 2017) • Introducing well-paid job opportunities (Jensen, 2012) • Increasing interactions of women with their peers (Dasgupta et al., 2015; Field et al., 2016)

9. Why Are Low Aspirations Dangerous? • Can lead to a behavioral poverty trap: • If the poor do not think their future can be better than it is today, they may choose a low level of aspirations and spend little effort improving their life (Duflo 2013; Dalton et al., 2015) • individuals with low aspirations may be afflicted by a pathological conservatism, whereby they forgo even small and feasible costs with potentially large benefits for fear of losing what they already possess (Ray, 2006)

10. Why Are Low Aspirations Dangerous? • Can lead to wasted development spending or misguided policies: • Many development interventions focus on providing the poor with resources (e.g., cash, credit, training, etc), but individuals with low aspirations may fail to take up or make maximal use of these opportunities (Bernard et al., 2014, 2015)

11. Why are High Aspirations Helpful? • High-aspiring individuals tend to: • Have higher incomes (Zax and Rees 2002) • Hold salaried or white-collar jobs and take on community leadership roles (Wydick et al. 2013) • Criticize their government when they experience poverty and relative deprivation—helping to foster government accountability (Healy et al. 2017) • IFPRI research by Bernard et al. (2014), Kosec and Mo (2017), and Kosec et al. (2018) shows that aspirations also contribute to forward looking economic, political, and social behaviors

12. The Future in Mind: Aspirations and Forward-Looking Behavior in Rural Ethiopia (Bernard et al. 2014) • Show that aspirations can be impacted durably by a development intervention—specifically, showing individuals’ documentaries of individuals who have been successful due to their own hard work and investments • The documentaries also increased forward-looking economic behavior, as a result of raising aspirations

13. Aspirations Increase Total Savings, Credit, and Investments in Education (Bernard et al. 2014) Has savings Total savings Took out credit Total credit Children 6- 15 enrolled in school Education spending Effect of viewing video 0.03 97.05* 0.03 20.70* 0.21*** 32.99* (0.02) (52.12) (0.02) (11.59) (0.06) (18.76) # Households 2063 2051 2063 2044 1113 1104 Control group mean 0.39 182.36 0.34 100.99 1.23 197.42

14. Aspirations and the Role of Social Protection: Evidence from a Natural Disaster in Rural Pakistan (Kosec and Mo 2017) • Consider approx. 3500 individuals (male and female) surveyed in 76 rural villages in rural Pakistan in 2012 • Show that, controlling for a host of other factors, individuals with higher aspirations engage in more forward-looking economic and political behaviors

15. Aspirations Lead to Forward-Looking Behaviors: Evidence from Rural Pakistan (Kosec and Mo 2017)

16. Aspirations and Women's Empowerment: Evidence from Kyrgyzstan (Kosec et al. 2018) • Use data on the aspirations, gender attitudes, and reports about women's involvement in decision-making of women and their husbands in 2,529 households surveyed as part of the 2016 round of the Life in Kyrgyzstan Survey • Employ an instrumental variable strategy using ‘predicted’ aspirations to instrument for aspirations • Those with higher aspirations tend to have more egalitarian attitudes toward women and involve women in household decision-making

17. High Aspirations of Women and Men Lead to More Egalitarian Gender Attitudes: Evidence from Kyrgyzstan (Kosec et al. 2018)

18. High Aspirations of Women Lead to Greater Involvement of Women in Household Decision- Making: Evidence from Kyrgyzstan (Kosec et al. 2018)

19. Why is Trust in Government Important? • Social trust plays a role equal to that of physical capital in determining economic prosperity (Fukuyama 1995) • A lack of trust can lead to citizens disengagement and a breakdown in accountability relationships in government (World Bank 2016)

20. How Does Poverty and Economic Vulnerability Affect Aspirations? • Kosec and Khan (2016) show that similar individuals living in communities with worse infrastructure (e.g., mud roads, far from railway station) or in communities without organized meetings to discuss community issues and events had lower aspirations • Kosec and Mo (2017) show that “unanticipated” exposure to Pakistan’s devastating 2010 floods—i.e. controlling for average levels of and variability in rainfall in the past—massively lowered individuals’ aspirations 1.5 years later

21. How Does Poverty and Economic Vulnerability Affect Trust? • Healy et al. (2017) and Kosec and Mo (2017) show that individuals in rural Pakistan experimentally primed in 2013 to feel relatively poor and vulnerable were less likely to trust their government than were individuals not primed in this way • Individuals were asked what their income was and given five answer choices (A, B, C, D, and E). For ½ of respondents, we selected response options so that their income was likely to be the middle choice (i.e., C), while for the other half, it was likely to be the bottom choice (i.e., A) • Evans et al. (2019) show that randomized receipt of a cash transfer program increased trust in government

22. What can Policymakers do to Blunt the Negative Psychological Effects of Poverty and Economic Vulnerability? • IFPRI research by Kosec and Mo (2017), Kosec and Mo (2018), and Evans et al. (2019) shows that government social protection can help address the negative impacts of poverty on aspirations and trust • The first two studies consider rural Pakistan, and the third considers rural Tanzania

23. Aspirations and the Role of Social Protection: Evidence from a Natural Disaster in Rural Pakistan (Kosec and Mo 2017) • Consider approx. 2000 households in rural Pakistan, surveyed in 2012 (1.5 years after devastating 2010 floods) • “Unanticipated” exposure to the floods significantly lowered aspirations, especially among the poor • Receipt of government social protection (flood relief via the “Watan Card” program; approx. 10% of monthly income for a year) eliminated the negative impacts • The value of social protection is underestimated if aspirations are ignored

24. Receipt of Flood Relief (“Watan Card Program”) Eliminates Reduction in Aspirations Due to Flood Exposure (Kosec and Mo 2017)

25. Receipt of Flood Relief (“Watan Card Program”) Eliminates Reduction in Aspirations Due to Flood Exposure (Kosec and Mo 2017)

26. The Effects of Social Protection on Trust in Government: Evidence from an Experiment and Quasi-Experiment in Pakistan (Kosec and Mo 2018) • Recall that individuals in rural Pakistan who were primed to feel relatively poor were less trusting of their government • Can social protection blunt these negative impacts on trust? • We compared individuals in households just below a wealth cutoff, who received a cash transfer program, with individuals just above the wealth cutoff who did not • Distrust in government due to being primed to feel relatively poor and deprived was only present among those who did NOT get the cash transfer program; for those who received it, their trust in government was not damaged at all

27. Receipt of a Cash Transfer Program Eliminates Negative Effects of Feeling Relatively Poor (Kosec and Mo 2018) Only those primed to feel relatively poor saw their aspirations increased by receipt of a cash transfer program (The Benazir Income Support Program)

28. Cash Transfers Increase Trust in Local Government (Evans et al. 2019) • Consider approx. 1700 households in rural Tanzania, surveyed as baseline in 2009 (before a 2010 cash transfer program was implemented), at midline in 2011, and at endline in 2012 • Cash transfers increased trust in leaders and perceptions of leaders’ responsiveness and honesty. • Beneficiaries reported higher trust in elected leaders but not in appointed bureaucrats.

29. Cash Transfers Increase Trust in Local Government: Evidence from Rural Tanzania (Evans et al. 2019)

30. What Have We Learned? • Poverty, inequality, and negative economic shocks can lower individuals’ aspirations, or goals, for the future and erode their trust in government • This matters since aspirations and trust contribute to entrepreneurship, productive investments, civic engagement, gender equity, and, ultimately, welfare • Government has the ability to counteract these negative impacts of poverty, inequality, and shocks through the provision of targeted social protection • If we ignore the psychological benefits of social protection programs, we will underestimate their overall benefits

31. References • Beaman, L., Duflo, E., Pande, R., and Topalova, P. 2012. “Female leadership raises aspirations and educational attainment for girls: A policy experiment in India.” Science, 1212382. • Bernard, T., Dercon, S., Orkin, K., and Seyoum Taffesse, A. 2014. “The future in mind: Aspirations and forward-looking behaviour in rural Ethiopia.” CSAE Working Paper Series 2014-16. • Bernard, T., Dercon, S., Orkin, K., and Seyoum Taffesse, A. 2015. “Will video kill the radio star? Assessing the potential of targeted exposure to role models through video.” The World Bank Economic Review 29 (suppl_1), S226–S237. • Dalton, P. S., Ghosal, S., and Mani, A. 2015. “Poverty and aspirations failure.” The Economic Journal 126 (590): 165–188. • Dasgupta, N., Scircle, M. M., and Hunsinger, M. 2015. “Female peers in small work groups enhance women’s motivation, verbal participation, and career aspirations in engineering.” Proceedings of the National Academy of Sciences, 201422822. • Evans, D., Holtemeyer, B., and Kosec, K. 2019. “Cash Transfers Increase Trust in Local Government.” World Development 114: 138-155.

32. References • Field, E., S. Jayachandran, R. Pande, and N. Rigol (2016). “Friendship at work: Can peer effects catalyze female entrepreneurship?” American Economic Journal: Economic Policy 8 (2): 125–53. • Fukuyama, F. 1995. Trust: The social virtues and the creation of prosperity. Number D10 301 c. 1/c. 2. Free Press Paperbacks. • Genicot, G. and D. Ray. 2017. Aspirations and inequality. Econometrica 85 (2): 489–519. • Jensen, R. 2012. “Do labor market opportunities affect young women’s work and family decisions? Experimental evidence from India.” The Quarterly Journal of Economics 127 (2): 753–792. • Healy, A., Kosec, K., and Mo, C. 2017. “Economic Development, Mobility, and Political Discontent: An Experimental Test of Tocqueville’s Thesis in Pakistan.” American Political Science Review 111(3): 605-621. • Kosec, K. and Khan, H. 2016. “Understanding the Aspirations of the Rural Poor.” In Agriculture and the Rural Economy In Pakistan, Eds. Spielman, D., Malik, S.J., Dorosh, P., and Ahmad, N. University of Pennsylvania Press: Philadelphia. • Kosec, K., and Mo, C. 2017. “Aspirations and the Role of Social Protection: Evidence from a Natural Disaster in Rural Pakistan.” World Development 97: 49-66.

33. References • Kosec, K., and Mo, C. 2018. “The Effects of Social Protection on Trust in Government: Evidence from an Experiment and Quasi-Experiment in Pakistan.” Unpublished manuscript. • Kosec, K., Akramov, K., Mirkasimov, B., and Song, J. 2018. “Aspirations and Women's Empowerment: Evidence from Kyrgyzstan.” IFPRI Discussion Paper, December 2018. • Ray, D. (2006). “Aspirations, poverty, and economic change.” Understanding poverty 409421. • Riley, E. 2017. “Increasing students’ aspirations: the impact of Queen of Katwe on students’ educational attainment.” CSAE Working Paper WPS/2017-13. • World Bank. 2016. Making Politics Work for Development: Harnessing Transparency and Citizen Engagement. World Bank Group: Washington, DC. • Wydick, B., P. Glewwe, and L. Rutledge (2013). “Does international child sponsorship work? A six-country study of impacts on adult life outcomes.” Journal of Political Economy 121 (2): 393–436. • Zax, J. S. and D. I. Rees (2002). “IQ, academic performance, environment, and earnings.” Review of Economics and Statistics 84 (4): 600–616.