Poverty and aspirations failure

  • Anandi Mani Anandi Mani
  • Patricio Dalton Patricio Dalton
  • Sayantan Ghosal Sayantan Ghosal

We develop a theoretical framework to study the psychology of poverty and ‘aspirations failure’. In our framework, the rich and the poor share the same preferences – and also a behavioral bias in setting aspirations. Greater downside risks imposed by poverty exacerbatesthe effects of this behavioral bias: the poor are more susceptible to both an aspirations failure and pessimism about the likelihood of achieving success. Poverty limits the set of people whose lifeexperiences the poor consider relevant for forming their own beliefs and aspirations. Mitigating behavioral poverty traps require policies which go beyond reducing material deprivation.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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