Changing Households' Investments and Aspirations Through Social Interactions: Evidence from a Randomized Transfer Program

45 Pages Posted: 20 Apr 2016

See all articles by Karen Macours

Karen Macours

Paris School of Economics (PSE)

Renos Vakis

The World Bank

Date Written: November 1, 2009

Abstract

Low aspirations can limit households' investments and contribute to sustained poverty. Vice versa, increased aspirations can lead to investment and upward mobility. Yet how aspirations are formed is not always well understood. This paper analyzes the role of social interactions in determining aspirations in the context of a program aimed at increasing households' investments. The causal effect of social interactions is identified through the randomized assignment of leaders and other beneficiaries to three different interventions within each treatment community. Social interactions are found to affect households' attitudes toward the future and to amplify program impacts on investments in human capital and productive activities. The empirical evidence indicates that communication with motivated and successful nearby leaders can lead to higher aspirations and corresponding investment behavior.

Keywords: Debt Markets, Labor Policies, Investment and Investment Climate, Primary Education, Housing & Human Habitats

Suggested Citation

Macours, Karen and Vakis, Renos, Changing Households' Investments and Aspirations Through Social Interactions: Evidence from a Randomized Transfer Program (November 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1517009

Karen Macours (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Renos Vakis

The World Bank ( email )

1818 H Street NW
Washington, DC 20043
United States

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