pro-poor

Sayantan Ghosal, Adam Smith Chair in Political Economy, discusses an often-overlooked policy question: What is the relationship between aspiration failure and the continuation of poverty?

Conventional pro-poor policies typically tend to focus on relaxing external (material resource) constraints such as lack of credit, education or insecure property rights. Largely missing is a focus on internal (psychological) constraints that may cause poverty traps. One example of such an internal constraint is an aspirations failure, defined as the failure to aspire to our own potential.

Aspirations positively affect the outcomes that individuals achieve. Empirical evidence gathered across a wide range of countries and settings shows that low aspirations go hand-in-hand with persistent poverty. Moreover, this link between poverty and low aspirations cannot be fully explained by lack of opportunities or information about pathways out of poverty. Appadurai (2004) refers to what appears to be a lack of the ‘capacity to aspire’ among the poor – which raises the question of whether such aspirations failure is a cause of poverty, or its consequence.

Poverty and Aspirations Failure paper

In my paper, “Poverty and Aspirations Failure” (with P. Dalton and A. Mani, Economic Journal, , Vol. 126, Issue 590, February 2016, pp.165-188), we provide a conceptual framework linking poverty and aspirations, which shows that it is the latter.

The paper develops a theoretical framework where higher aspirations help achieve better outcomes – and better outcomes (achieved through higher effort) spur higher aspirations too. The research builds on the assumption that individuals underestimate this latter channel, i.e. how their aspirations may evolve over their lifetime as a consequence of their current effort. It is not that the poor alone suffer from this bias, the rich do too. However, those who are already poor and marginalised, given their low initial wealth and marginal social position, have a lower expected benefit from investing effort to achieve their goals and thus reach their aspirations. In the long-run, such an effect lowers the aspiration level of a poor person as well. Taken together, the implication is that persistent poverty makes it more likely that these internal constraints become self-fulfilling and, in the long run, an independent source of disadvantage for poor persons in their own right.

Poverty lowers the aspirations’ level of a poor person, relative to what he could optimally aim to achieve”. This is what we refer to as an aspiration failure. There is considerable evidence in favour of such a theoretical framework.

The lack of aspirations as a trait of the poor has been documented across a wide range of countries and settings, amongst low-income urban residents in America (MacLeod, 1995) and UK (LYSPE, 2006, in Cabinet Office, 2008), Jamaican male youths (Walker, 1997) and rural Ethiopian households (Frankerberger et al., 2007; Bernard et al., 2011).

Moreover, this lack of aspirations among the poor does not seem to be fully explained by external constraints such as a lack of opportunity or information about pathways out of poverty. For example, Banerjee et al. (2011) report on the take up of an asset assistance and training program aimed to enhance the living standards of the ultra-poor in West Bengal, India. They find that 35.6% of the households who are offered this program did not take up the assistance despite its obvious benefits, as confirmed by changes in the well-being of program participants. Similarly, Duflo et al. (2011) document very low rates of take up of highly profitable fertiliser by maize farmers in Busia, Kenya, despite convenient opportunities to buy it at reasonable prices. Farmers were also given ample opportunity both to learn how to use the fertiliser, and to realise that the rates of return from its use were as high as 70% per annum so the usual external constraints imposed by a lack of money, information or opportunity do not seem to be at work.

Beaman’s et al. (2012), for instance, found that in India, the exposure to female leaders in local government has raised both the aspirations and educational attainment of girls significantly, despite no change in the resources available for their education. Likewise, Bernard et al. (2014) found that poor rural Ethiopians increased their aspirations and assets six months after they watch a documentary about people from similar communities who had succeeded in their business.

The key policy implication of the paper is that interventions that address aspiration levels can, at the very minimum, enhance the effectiveness of policies that address material constraints. Moreover, there are specific conditions under which pro-poor policies aimed at raising aspirations can enhance welfare, without any change in material circumstances.

 

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Adam Smith Chair in Political Economy
Adam Smith Business School, University of Glasgow
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