Poverty and aspirations failure

P.S. Dalton, S. Ghosal, A. Mani

Research output: Contribution to journalArticleScientificpeer-review

78 Citations (Scopus)

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
behavioral bias in setting aspirations. We show that poverty can exacerbate
the effects of this behavioral bias leading to aspirations failure and hence, a
behavioral 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.
Original languageEnglish
Pages (from-to)165-188
JournalThe Economic Journal
Volume126
Issue number590
DOIs
Publication statusPublished - Feb 2016

Keywords

  • aspirations
  • poverty traps

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