EOS Development seminar,

joint with the Universities of Antwerp, Leuven, Louvain and Namur

Kate Orkin

Oxford University, Blavatnik School of Governance

will give a presentation on

Aspirations, Assets, and nti-Poverty Policies

Abstract

Aspirations for a better future can motivate people to make long-term investments. But do aspirations constrain investment only when people are poor, or do they continue to limit investment when people become wealthier? We run a 415-village field experiment in Western Kenya to study this relationship. We cross-randomize two interventions: a video documentary about successful people in similar villages who escaped poverty, which aims to increase aspirations; and a 2,273 USD PPP unconditional cash transfer. We find that aspirations limit investments: the psychological intervention alone increases aspirations, labour supply, expenditure on inputs, revenue, and education spending, by roughly one quarter to one third as much as the cash transfer. After people receive cash, their aspirations for income and wealth increase, and aspirations no longer constrain investments in economic activities. However, cash alone does not increase aspirations for and investments in children's education. In contrast, the group who receive both video and cash have higher education aspirations and invest more in children's education than the group who receive only cash. These results suggest that increases in wealth alone remove most of the constraints of aspirations on investment, but low aspirations may still limit longer-term, potentially high-return investments.

Joint with Robert Garlick, Mahreen Mahmud, Richard Sedlmayr, Johannes Haushofer, Stefan Dercon