Aspiration Adaptation in Resource-Constrained Environments

57 Pages Posted: 24 Jan 2018  

Sebastian Galiani

University of Maryland - Department of Economics

Paul J. Gertler

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Raimundo Undurraga

New York University (NYU)

Multiple version iconThere are 2 versions of this paper

Date Written: January 16, 2018

Abstract

We use a multi-country field experiment to test the effect of a slum-housing intervention on the housing aspirations of non-beneficiary neighbors. Initially after treatment, nontreated households’ aspirations to upgrade their dwelling are significantly higher compared to the treatment group, suggesting that they aspire to “keep-up” with their treatment Joneses’. No effects are found, however, on housing investments. Eight months later, the aspirational effect disappears. Estimates based on a structural model of aspiration adaptation show that the decay rate is 38% per month. Our evidence suggests that simply fostering higher aspirations may be insufficient to encourage forward-looking behavior among the poor.

Keywords: Aspirations, Adaptation, Poverty Traps, Experimental Evidence

JEL Classification: O1

Suggested Citation

Galiani, Sebastian and Gertler, Paul J. and Undurraga, Raimundo, Aspiration Adaptation in Resource-Constrained Environments (January 16, 2018). Available at SSRN: https://ssrn.com/abstract=3103190 or http://dx.doi.org/10.2139/ssrn.3103190

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Paul J. Gertler

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
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510-642-1418 (Phone)
510-642-4700 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Raimundo Undurraga

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
United States

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