Aspirations and Financial Decisions: Experimental Evidence from the Philippines

David McKenzie, Aakash Mohpal and Dean Yang

No 28607, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A randomized experiment among poor entrepreneurs tested the impact of exogenously inducing higher financial aspirations. In theory, raising aspirations could have positive effects by inducing higher effort, but could also reduce effort if unmet aspirations lead to frustration. Treatment resulted in more ambitious savings goals, but nearly all individuals fell far short of reaching these goals. Two years later, treated individuals had not saved more, and actually had lower borrowing and business investments. Treatment also reduced belief in the amount of control over one’s life. Setting aspirations too high can lead to frustration, leading individuals to reduce their economic investments.

JEL-codes: D14 G53 O12 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-cwa, nep-ent, nep-exp, nep-mfd and nep-sea
Note: DEV
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Citations: View citations in EconPapers (5)

Published as David McKenzie & Aakash Mohpal & Dean Yang, 2022. "Aspirations and financial decisions: Experimental evidence from the Philippines," Journal of Development Economics, .

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