Poverty and Aspirations Failure

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.The Chronic Poverty Report estimates that 320-443 million people live trapped in chronic poverty: that is, these people remain poor for much or all of their lives and their children are likely to inherit their poverty as well. An influential literature on poverty traps argues that such persistent poverty is driven by constraints that are external to the individual. Examples of such constraints are credit or insurance market imperfections (

Aspirations and food security in rural Ethiopia

“…Yet, what is missing in these studies (and in the broader empirical literature on the determinants of food security) is the importance of psychological factors or 'internal' constraints, such as low aspirations. However, internal constraints are also important for they could reinforce external constraints (or material deprivations) and this may lead to a self-sustaining trap of poverty and low levels of proactivity (Appadurai 2004;Ray 2006;Dalton et al 2016). This is because poverty limits the people's 'capacity' to aspire (Appadurai 2004) by creating mental models that uniquely diminish the significance of some features of the environment while magnifying others (Bernard et al 2008).…”

“…For example, Ray (2006) viewed poverty as both a result of and a cause of a failure of aspirations. Dalton et al (2016), on the other hand, theoretically showed that while both the rich and the poor may share the same preferences and also behavioural bias in setting aspirations, poverty exacerbates the effects of this behavioural bias leading to behavioural poverty traps and the failure of aspirations, ultimately affecting their choices of effort.…”

Myopic Misery: Maternal Depression, Child Investments, and the Neurobiological Poverty Trap

“…Cash grants, which were received unconditionally on the state of mental health, were found to lower the transmission rate by between 12 and 24 percentage points. This paper is closely related to recent research on behavioral poverty traps (Bernheim et al, 2015;Dalton et al, 2016) and to the literature on the interaction between wealth and time discounting, and their impact on economic development (e.g. Schumacher, 2009;Strulik, 2012).…”

Behavioral Decisions and Policy

“…For example, as highlighted in Beshears et al (2008), only after paying late fees video renters learn to return their videos on time (Fishman and Pope, 2007) and credit card account holders learn to pay their bills on time (Agarwal et al, 2007). In a similar vein, sex workers begin using condoms only when the information about the use of condoms is provided by other trained sex workers and no behavioral change is observed when the information is 7 Dalton et al (2010) propose a behavioural decision model with aspirations failure where it is shown the way role models can impact aspirations and help the DM to scape from a lack of aspirations/poverty trap.…”