EconPapers    
Economics at your fingertips  
 

Success, survive or escape? Aspirations and poverty traps

David Chivers ()

Journal of Economic Behavior & Organization, 2017, vol. 143, issue C, 116-132

Abstract: I present a model of occupational choice where an agent decides whether to invest in a project that yields risky returns or a project that yields safe returns. An agent's utility is affected by the presence of an aspiration level which will only be satisfied if their final income is above the poverty line. I show that agents who are sufficiently above the poverty line will invest in the risky project and are able to aspire for success. An agent, however, who is just above the poverty line, may be so concerned about falling into poverty that they choose to invest in the safe project. These individuals aspire only to survive. Alternatively, if an agent is sufficiently below the poverty line, then they will invest in the risky project even if expected returns are lower than the safe project. These individuals have “nothing left to lose” and therefore aspire to escape. Two forms of poverty traps emerge from the resulting equilibria: one above the poverty line, and one below the poverty line. Finally, I offer empirical support for the model based on individual level survey data across a large number of countries.

Keywords: Poverty traps; Entrepreneurship; Aspirations; Loss aversion; Development (search for similar items in EconPapers)
JEL-codes: D31 D81 E24 L26 O11 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268117302597
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Success, Survive or Escape? Aspirations and Poverty Traps (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:143:y:2017:i:c:p:116-132

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Neilson, William Stuart

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-06-06
Handle: RePEc:eee:jeborg:v:143:y:2017:i:c:p:116-132