Aspirations and investments in rural Myanmar

The aspirations gap is the distance between an individual’s current and aspired standard of livelihood. A growing theoretical literature predicts that aspirations both “too close” and “too far” away from current standards lead to less investment in the future. These theories imply an inverted U-shap...

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Bibliographic Details
Published inJournal of economic inequality Vol. 19; no. 4; pp. 727 - 752
Main Author Bloem, Jeffrey R.
Format Journal Article
LanguageEnglish
Published New York Springer US 01.12.2021
Springer
Springer Nature B.V
Subjects
Analysis
Consumption
Development Economics
Economic Growth
Economics
Economics and Finance
Expenditures
Experiments
Households
Hypotheses
Incentives
Inequality
International Economics
Investments
Low income groups
Political Science
Poverty
Public Finance
Myanmar
Myanmar (Burma)
Poverty
R11
Investments
Psychology
O18
D19
Aspirations
E71
Inequality
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Summary:The aspirations gap is the distance between an individual’s current and aspired standard of livelihood. A growing theoretical literature predicts that aspirations both “too close” and “too far” away from current standards lead to less investment in the future. These theories imply an inverted U-shaped relationship between the aspirations gap and investments. I test this hypothesis and extend existing empirical findings to rural Myanmar by examining the relationship between the income aspirations gap and real estate investment choices. I find that income aspirations that are ahead, but not too far ahead, of current income levels provide the best incentive for investment. Analysis of heterogeneity highlights that this relationship is strongest for those with relatively low income and those who hold fatalistic beliefs. These findings suggest the presence of psychological constraints to poverty alleviation and development in rural Myanmar.
ISSN:1569-1721
1573-8701
DOI:10.1007/s10888-021-09478-7