Poverty and Aspirations Failure

35 Pages Posted: 22 Dec 2011

See all articles by Patricio S. Dalton

Patricio S. Dalton

Tilburg University - Center for Economic Research (CentER)

Sayantan Ghosal

University of Glasgow - Adam Smith Business School

Anandi Mani

University of Warwick

Multiple version iconThere are 3 versions of this paper

Date Written: September 23, 2011

Abstract

We develop a theoretical framework to study the psychology of poverty and 'aspirations failure'. In our framework, the rich and the poor share the same preferences - and also a behavioral bias in setting aspirations. Greater downside risks imposed by poverty exacerbates the effects of this behavioral bias: the poor are more susceptible to both an aspirations failure and pessimism about the likelihood of achieving success. Poverty limits the set of people whose life experiences the poor consider relevant for forming their own beliefs and aspirations. Mitigating poverty traps require policies which go beyond reducing material deprivation.

Keywords: Reference-dependent preferences, aspirations, persistent poverty, locus of control, simillarity and belief formation

JEL Classification: O10, O15, O12, D03

Suggested Citation

Dalton, Patricio S. and Ghosal, Sayantan and Mani, Anandi, Poverty and Aspirations Failure (September 23, 2011). Netspar Discussion Paper No. 09/2011-098. Available at SSRN: https://ssrn.com/abstract=1975339 or http://dx.doi.org/10.2139/ssrn.1975339

Patricio S. Dalton (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Sayantan Ghosal

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

Anandi Mani

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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