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Formation of Aspirations – An Empirical Analysis

Tanguy Bernard1, Stefan Dercon2, Fanaye Tadesse1, Alemayehu Seyoum Taffesse1, and Ibrahim Worku1

1International Food Policy Research Institute2 University of Oxford

Presentation on RISE Research DayMarch 6, 2015

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Summary Poorer individuals, on average, have lower aspirations;

Individuals in poorer communities have lower aspirations;

Women appear to have lower aspirations;

Individuals who believe they have significant control over their lives (internal locus of control) display higher aspirations, send more of their children to school, achieve better nutritional outcomes for their children, and more likely to adopt modern farming practices;

Caveat:

Mostly panel data used, thus some claim to causal links;

But happy to consider them as correlations;

Policy implications - design programs for poverty reduction, social protection

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Motivation - Initial

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Fatalism

Examples:

“We live only for today”;

“It is a life of no thought for tomorrow”;

“We have neither a dream nor an imagination”

Rahmato and Kidanu (1999)

General - lack of proactive and systematic effort to better one’s own life;

Economic perspective – not making the ‘investments to better one's life’.

Evidence: underinvestment by the poor is common and can be a source of persistence in poverty and inequality

What are Aspirations?

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Aspirations:

are goals or boundary-states sought after with respect to a relevant domain of choice (future-oriented);

Aspirations and expectations – preferences vs. beliefs;

Aspirations are important for analysing and/or addressing poverty:

Condition individual behaviour and well-being (motivators ); Are distributed unevenly within communities; Are context-dependent and changing;

Wealth Aspiration - DataEthiopian Rural Households Survey (ERHS)

Spatial coverage: 15 Kebeles (villages);Temporal coverage: 1993/94-2009 (7 rounds the last three roughly one every 5 years)

Wealth Aspirations

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 ordered responses to Q39b as the dependent variable;o ordered probit model (basic, generalized, semi-nonparametric);

Robust/Clustered standard errors

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Marginal (Partial) Effects – All Rounds

dy/dx per one SD change (%)

Shock

Median income growth of neighbors

(round7-round6)

Median income

growth (all rounds)

Number of rounds

respondent was poor

Pr(Wealth Aspiration = 1) 1.92 -3.44 0.00 2.30

Pr(Wealth Aspiration = 2) 0.79 -3.44 0.00 0.88

Pr(Wealth Aspiration = 3) 1.36 0.00 -2.60 0.00

Pr(Wealth Aspiration = 4) -3.84 -6.88 5.19 -2.65

Pr(Wealth Aspiration = 5) -0.23 13.77 0.00 -0.71

Mean (SD) 2.4 (1.1) -18.3 (34.4) 3.3 (26.0) 2.8 (1.8)

Note: Figures in red are statistically significant at least at 10% level of significance. Controls include: sex, age, marital status, education, participation in non-farm activities, Iddir membership.

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Marginal (Partial) Effects – Insurance Data

dy/dx per one SD change (%)

Self-reported wealth

Median self-reported wealth in the village

Log (Asset Aspiration)

Mean = 11.02, SD = 1.3729.0 9.1

Mean (SD) 4.4 (1.1) 4.13 (0.35)

Note: Figures in red are statistically significant at least at 1% level of significance. Controls include: sex, age, marital status, education, participation in non-farm activities, Iddir membership.

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Surveys of the Index Insurance Study 2011-2014;

Baseline and four follow-up household surveys of 1760 randomly selected households.

Aspiration module;

Internal Locus of Control – FTF

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.6.7

.8.9

0 2 4 6 8selfreported_wealth

Pr(internal_loc) 95% CIFitted values

Locus of Control and Selected Outcomes

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 Improved seed use

Fertilizer use

Radio ownership

Girls school ratio

School ratio – all

school-age

children

LoC - Internal0.0064** 0.0060* 0.0095*** 0.0071*** 0.0050**

  (0.003) (0.003) (0.002) (0.002) (0.002)

LoC - Chance-0.0015 -0.0144*** -0.0034* 0.0031 0.0016

  -0.003 -0.004 (0.002) (0.003) (0.003)

LoC-Others-0.0035 -0.0044 -0.0040** -0.0097*** -0.0086***

  -0.003 -0.003 (0.002) (0.003) (0.003)

Self-reported wealth

0.0361*** 0.0647*** 0.0496*** 0.0375*** 0.0307***

Controls – sex, age, education; village clustered standard errors.

Observations Results

Poorer individuals have on average lower aspirations;

Panel data used, but happy to consider them as correlations;

Results persist across models;

Implications

Helping create opportunities may not be sufficient

Devising mechanisms that encourage the poor to create and/or exploit opportunities can help (nudges - role models, organizations)

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Thank you

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