Failure, Frustration, and Formation of Aspirations in Nepal

I am a bit behind on this, but earlier this year a nice new paper on aspirations was published in the Journal of Economic Behavior & Organization. The paper, entitled “Aspirations Failure and Formation in rural Nepal” is co-authored by a team of researchers who are currently performing really interesting field-work in Nepal. Here is a link to a Feed the Future Policy Brief and here is the abstract to the paper:

Aspirations, or a lack thereof, have recently gained the attention of economists as a behavioral constraint to future-oriented behavior and investment. In this paper we empirically test the theories of aspirations failure and formation articulated in Appadurai (2004), Ray (2006), and Genicot and Ray (2015) using a unique dataset from rural Nepal. We ask two questions: (1) What is the relationship between aspirations and future-oriented behavior? and (2) To what extent are an individual’s aspirations associated with the observable characteristics of those around her? We find that aspirations correspond with future-oriented economic behavior as predicted by theory: investment in the future increases with aspirations up to a certain point, but if the gap between one’s current status and aspirations becomes too large, investment subsequently declines. We also find that one’s aspirations are associated with outcomes of those in her social network of higher, but not lower, status. Together these findings provide empirical evidence that aspirations, which may be a social phenomenon, can either stimulate development or reinforce poverty.

This paper has several neat features.

First, the Janzen, Magnan, Sharma, and Thompson build on the existing theoretical work about the relationship between aspirations (more specifically the aspirations gap) and investments or other future-oriented behavior. Building off theory suggested by anthropologists (Appadurai 2004) and economists (Ray 2006), the model adapts the recent model by Genicot and Ray (Econometrica, 2017). For non-economist readers this model might be a bit uninteresting. However, for economists who are unfamiliar with the literature on aspirations, this model does a nice job explaining why internal psychological constraints potentially matter.

Second, the paper tests the theory that aspirations that are “ahead, but not too far ahead” are most tightly related to future oriented behavior. Janzen et al. do this by looking at behavior related to saving for the future and investments in education of children. It is a bit of a complicated exercise, but the headline result is that they find evidence that supports the theory of an inverted U-shape relationship between the aspirations gap and future oriented behavior. This has implications for policymakers who aim to design policies and programs that augment aspirations. Namely, there may be a point in which a larger gap between an individual’s current livelihood and their aspired livelihood results in decreasing returns. Here are two figures from the paper showing the nonparametric relationship between the aspirations gap of income and education with corresponding future oriented behavior.

Third, the authors also tackle a related question. Namely, what influences an individual’s aspirations? Existing theory suggests that aspirations are formed via an individual’s “aspirations window”. This window is filled with those who an individual can identify with and who an individual looks to in order to understand what is possible for their own life. Janzen et al. find that in rural Nepal income and education aspirations are in fact associated with the level of income and education attainment of those within an individual’s social circle. This finding has implications for a potential mechanism for “spillover” effects of a particular program onto others. If the livelihood of those in my reference group increases, then I may think that my livelihood may soon improve as well. (Think about Hirschman’s tunnel effect here.)

This paper is a positive step forward for the literature on the role of aspirations and hopes (and other internal psychological constraints) in developing countries. Much is to be studied and understood in this relatively new topic area. I look forward to seeing many more research papers published on these sorts of relationships in the near future.

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