Aspirations and Inequality

Abstract

This paper develops a theory of socially determined aspirations, and the interaction of those aspirations with growth and inequality. The interaction is bidirectional: economy‐wide outcomes determine individual aspirations, which in turn determine investment incentives and social outcomes. Thus aspirations, income, and the distribution of income evolve jointly. When capital stocks lie in some compact set, steady state distributions must exhibit inequality and are typically clustered around local poles. When sustained growth is possible, initial histories matter. Either there is convergence to an equal distribution (with growth) or there is perennial relative divergence across clusters, with within‐cluster convergence. A central feature that drives these results is that aspirations that are moderately above an individual's current standard of living tend to encourage investment, while still higher aspirations may lead to frustration.

Mass Media and Social Change: Can We Use Television to Fight Poverty?

“…This focus is motivated by recent theories that highlight the potential for an "aspirations trap": the poor may lack the "capacity to aspire", perceiving certain goals as beyond their reach. Hence, they may not invest towards those goals and this in turn perpetuates their state of poverty (e.g., Genicot and Ray 2015;Dalton, Ghosal, and Mani 2016). Interventions capable of changing people's mental models about their opportunities and ways to achieve them are thus important to break these poverty traps.…”

Poverty and Aspirations Failure

“…Ray (2006) provides a discussion of how socially determined aspirations contribute to poverty persistence: this is the starting point of our article. A related paper is Genicot and Ray (2014) which models aspirations as socially determined reference points via exogenously specified aspiration windows. Other closely related papers on aspirations include Stark (2006) and Bogliacino and Ortoleva (2013).…”

“…In our deterministic model, aspirations enter the pay-offs via a reference point. Expectations, however, enter typically via the weights (beliefs) attached to the pay-offs associated with (uncertain) future outcomes.10 In an interactive model where aspirations are at least in part socially determined, such a gap would be an endemic feature(Bogliacino and Ortoleva, 2013;Genicot and Ray, 2014).© 2014 The Authors.…”

Poverty and Self-Control

“…6 Aspiration failures can create similar traps. See, for example, Appadurai (2004), Ray (2006), Genicot and Ray (2014), and the United Nations Development Program Regional Report for Latin America, 2010. However, this complementary approach does not generate a demand for commitment devices.…”