Inflated Expectations and Natural Resource Booms: Evidence from Kazakhstan

Gerhard Toews

No 109, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: We use the exogenous variation in oil prices to study the negative effect of income aspirations on households' satisfaction with income. To evaluate the effect we use data on reported satisfaction with income from Kazakhstan's Household Budget Survey - a quarterly, unbalanced panel of households covering the period 2001-2005. Our results suggest that a 20% increase in the oil price decreased households' satisfaction with income by half a standard deviation within a year. We argue that the drop in satisfaction is due to peoples' inflated expectations. This result highlights the importance of managing expectations in a rapidly changing economic environment.

Keywords: Resource Boom; Conflict; Aspirations; Income Satisfaction (search for similar items in EconPapers)
JEL-codes: D03 I31 Q33 Q34 (search for similar items in EconPapers)
Date: 2013-04-16
New Economics Papers: this item is included in nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:109

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