Aspiration Adaptation in Resource-Constrained Environments

Sebastian Galiani, Paul Gertler and Raimundo Undurraga

No 24264, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a multi-country field experiment that combines random variation at the treatment level with exogenous variation in the length of exposure to treatment to test the effect of a slum-housing intervention on the evolution of housing aspirations of untreated co-resident neighbors over time. Initially after treatment, we observe a huge control- treatment housing gap in favor of treated units. As a result, non-treated households' aspirations to upgrade their dwelling are significantly higher compared to the treatment group, suggesting that they aspire to “keep-up” with the treated Joneses', as in standard models of peer effects. However, eight months later, no effects are found on housing investments and the aspirational effect completely disappears. Estimates based on a structural model of aspiration adaptation show that the decay rate is 38% per month. Our evidence suggests that simply fostering higher aspirations may be insufficient to encourage forward-looking behavior among the poor.

JEL-codes: O1 (search for similar items in EconPapers)
Date: 2018-01
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Published as Galiani, Sebastian & Gertler, Paul J. & Undurraga, Raimundo, 2021. "Aspiration adaptation in resource-constrained environments," Journal of Urban Economics, Elsevier, vol. 123(C).

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Journal Article: Aspiration adaptation in resource-constrained environments (2021)
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