Poverty and Aspirations Failure

24 Pages Posted: 11 Feb 2016

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: February 2016

Abstract

We develop a theoretical framework to study the psychology of poverty and ‘aspirations failure’, defined as the failure to aspire to one's own potential. In our framework, rich and the poor persons share the same preferences and same behavioural bias in setting aspirations. We show that poverty can exacerbate the effects of this behavioural bias leading to aspirations failure and hence, a behavioural poverty trap. Aspirations failure is a consequence of poverty, rather than a cause. We specify the conditions under which raising aspirations alone is sufficient to help escape from a poverty trap, even without relaxing material constraints.

Suggested Citation

Dalton, Patricio S. and Ghosal, Sayantan and Mani, Anandi, Poverty and Aspirations Failure (February 2016). The Economic Journal, Vol. 126, Issue 590, pp. 165-188, 2016. Available at SSRN: https://ssrn.com/abstract=2730940 or http://dx.doi.org/10.1111/ecoj.12210

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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