The document discusses a study on the formation of aspirations among individuals in Ethiopia. It presents evidence that an individual's aspirations are shaped by their current wealth level, neighbors' wealth, exposure to economic opportunities, and experiences of shocks. The study uses survey data from Ethiopia to estimate the relationship between these factors and individuals' reported level of wealth they would like to achieve. Preliminary results suggest that poorer individuals and those with less wealthy neighbors have lower aspirations, which could perpetuate poverty and inequality over time by limiting efforts to improve economic conditions. The researchers plan to conduct further analysis using a threshold model and impact evaluations.
1. Formation of Aspirations – An Empirical Analysis Tanguy Bernard, Stefan Dercon, Fanaye Tadesse, Alemayehu Seyoum Taffesse , Ibrahim Worku Presentation at ESRC-CAGE Workshop on Inequality University of Warwick 6 July 2011
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6. Aspiration window Aspiration level and gap Aspiration failure Aspired Gap Efforts to improve Attained Well-being Perspectives Fatalism; Self efficacy; Aspirations Failure;
7. Step 1: Correlations Step 2: Measurement Step 3: Treatment Step 4: Experiment Step 5: Replications Research program
13. Variables – All survey rounds Wealth Aspiration Level of wealth the respondent would like to achieve (measured using a 10-point scale) Age Respondent's age in number of years Age squared Respondent's age in number of years (squared) Gender (male=1) Gender of respondent Non-farm activities (yes=1) Dummy - the respondent engages in non-farm activities (Yes=1) Iddir (member=1) Dummy - the respondent is a member of an Iddir (funeral association) (Member=1) Married (yes=1) Marital status of the respondent (married=1) Shock Shock faced by respondent in round 7 - index calculated using principal components Neighbourhood size Number of neighbours within a radius of 500m from the respondent's residence Average income growth of neighbours (round7-round6) Average growth in the real consumption per capita (in 1994 prices) of the respondent's neighbours between Rounds 6 and 7 (%). Income growth (round 2 - round 1) - Income growth (round 7 - round 6) Growth in the real consumption per capita (in 1994 prices) of the respondent's household between successive survey Rounds (%) Poor Number of rounds the respondent's family was poor (using the poverty line in 1994)
14. Marginal (Partial) Effects – All Rounds Note : Figures in red are statistically significant at least at 10% level of significance. dy/dx per one SD change (%) Married (yes=1) Average income growth of neighbors (R6-R7) Income growth (R6 – R7) Income growth (R5–R6) Poor Pr(Wealth Aspiration = 1) -0.25 -0.13 -0.09 -0.10 0.18 Pr(Wealth Aspiration = 2) -0.60 -0.34 -0.23 -0.26 0.31 Pr(Wealth Aspiration = 3) -1.50 -0.89 -0.60 -0.68 0.83 Pr(Wealth Aspiration = 4) -2.01 -1.27 -0.86 -0.96 1.17 Pr(Wealth Aspiration = 5) -2.73 -1.83 -1.24 -1.37 1.70 Pr(Wealth Aspiration = 6) -2.08 -1.56 -1.07 -1.18 1.45 Pr(Wealth Aspiration = 7) 0.15 -0.21 -0.14 -0.16 0.19 Pr(Wealth Aspiration = 8) 9.01 6.50 5.37 5.97 -5.84 Mean (SD) -18.2 (32.5) -18.3 (53.7) 2.2 (59.7) 2.8 (1.8)
15. Variables – Rounds 6-7 Wealth Aspiration Level of wealth the respondent would like to achieve (measured using a 10-point scale) Age Respondent's age in number of years Age squared Respondent's age in number of years (squared) Gender (male=1) Gender of respondent Non-farm activities (yes=1) Dummy - the respondent engages in non-farm activities (Yes=1) Iddir (member=1) Dummy - the respondent is a member of an Iddir (funeral association) (Member=1) Married (yes=1) Marital status of the respondent (married=1) Shock Shock faced by respondent in round 7 - index calculated using principal components Neighbourhood size Number of neighbours within a radius of 500m from of the respondent's residence Log of asset value Logarithm of the value of assets (including farm implements, furniture, jewelry) the respondent’s household owned in survey round 7 (2008/09) Log of average asset value of neighbors Logarithm of the average value of assets owned by the respondent's neighbours (residents within 500m radius of the respondent's house) excluding the respondent’s household
16. Marginal (Partial) Effects – Rounds 6-7 Note : Figures in red are statistically significant at least at 10% level of significance. dy/dx per one SD change (%) Gender (male=1) Log of asset value Log of average asset value of neighbors Pr(Wealth Aspiration = 1) 0.01 -0.04 -0.04 Pr(Wealth Aspiration = 2) 0.01 -0.04 -0.04 Pr(Wealth Aspiration = 3) 0.05 -0.12 -0.10 Pr(Wealth Aspiration = 4) 0.11 -0.30 -0.34 Pr(Wealth Aspiration = 5) 0.30 -0.85 -1.02 Pr(Wealth Aspiration = 6) 0.45 -1.34 -1.43 Pr(Wealth Aspiration = 7) 0.74 -2.20 -2.45 Pr(Wealth Aspiration = 8) 0.74 -2.07 -2.45 Pr(Wealth Aspiration = 9) 0.18 -0.50 -0.57 Pr(Wealth Aspiration = 10) -2.63 7.44 8.51 Mean (SD) 7.1 (1.2) 7.7 (0.7)
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Editor's Notes
Ethiopian households’ average expenditure pattern – stimulants vs. human capital - 2-4 times (HICE of 1995/96, 1999/2000, and 2004/05); Fatalism General - lack of proactive and systematic effort to better one’s own life (consistent with the language of the poor); Economic perspective - making the ‘investments to better one's life’.
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