Aspirations and the Persistence of Poverty and Inequalities
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DISSERTATION zur Erlangung des Doktorgrades der Wirtschaftswissenschaften (Dr. rer. pol.) Aspirations and the persistence of poverty and inequalities vorgelegt von Svenja Flechtner am 22.06.2016 an der Europa-Universität Flensburg Internationales Institut für Management und ökonomische Bildung Erster Gutachter: Zweiter Gutachter: Prof. Dr. Stephan Panther Prof. Dr. Carlo D’Ippoliti Europa-Universität Flensburg Sapienza University of Rome Contents Page Acknowledgements . .7 List of Figures . .9 List of Tables . 12 Introduction 13 I Aspirations: contouring a concept 23 1 Understanding human development: what can aspirations contribute? 25 1.1 Why does poverty persist? . 27 1.2 What can aspirations contribute? . 31 2 Models 39 2.1 Reference point models . 41 2.2 Debraj Ray: aspiration windows and aspiration gaps . 43 2.3 Aspirations, inequality and growth in a formal model . 48 2.4 Psychological aspiration traps . 55 2.5 Other models with applications to specific contexts . 60 3 How do aspirations develop? Insights from behavioural economics 65 3.1 Aspirations and ‘non-standard’ preferences . 66 3.1.1 Social learning and cultural transmission . 67 3.1.2 Adaptive processes . 72 3.2 Aspirations and ‘non-standard’ beliefs . 76 3.2.1 Cognitive dissonance . 79 3 3.2.2 Self-views, self-biases and attribution errors . 83 3.2.3 Selective awareness and mental short-cuts . 85 3.2.4 Mental models and cognitive frames . 88 4 Broadening the view: aspirations and different notions of rationality 93 4.1 The approach of mainstream behavioural economics . 94 4.2 Aspirations and alternative conceptions of rationality . 98 4.3 Rational aspirations in the light of identities . 103 5 What drives aspirations? Selected lessons from other disciplines 111 5.1 Arjun Appadurai: The capacity to aspire . 112 5.2 Albert Bandura: Social cognitive theory . 115 5.3 Pierre Bourdieu: Milieu and habitus . 120 6 Putting the pieces together: An integrative framework 127 6.1 Recapitulation: determinants and drivers of aspirations . 128 6.2 An integrative framework . 130 II Empirical evidence 135 7 Empirical evidence about aspirations and aspiration traps 137 7.1 Are aspirations really an important determinant of behaviour? . 140 7.2 Are aspirations really biased along socio-economic lines? . 147 7.3 What do we know about specific drivers of aspirations? . 151 7.3.1 Cultural transmission, social learning and habitus . 151 7.3.2 Aspiration windows, role models, and peer effects . 153 7.3.3 Social cognitive theory . 156 7.4 Are aspirations really influenced by macro-level developments? . 158 7.5 Summary and open questions . 159 8 Locus of control, inequality and growth: a cross-country perspective with data from the World Values Survey 163 8.1 Theory and relevant literature . 164 8.2 Data and model . 165 8.2.1 Measuring locus of control with World Values Survey data . 165 8.2.2 Model specification . 167 8.2.3 Descriptive statistics . 169 8.3 Results . 170 8.3.1 Wealth, growth, and inequality . 170 8.3.2 Growth and inequality dynamics in context . 174 8.4 Discussion and conclusion . 178 9 Do aspirations impact behaviour? Evidence from structural equation modelling 181 9.1 Brief summary: The identification problem . 183 9.2 Method: Structural Equation Modelling . 185 9.3 Model specification . 186 9.3.1 The structural model . 187 9.3.2 The measurement model . 189 9.3.3 Software choice: SEM Modelling and estimation in R . 191 9.4 Data Set: The Young Lives Study of Childhood Poverty . 193 9.5 Results . 200 9.6 Discussion and conclusion . 204 III Normative considerations 211 10 Should aspirations be a matter of policy concern? 213 10.1 Policy interventions in the aspirations literature . 216 10.2 Contrasting five normative perspectives . 218 10.2.1 Desire-fulfilment and welfarism . 219 10.2.2 Hedonistic approaches . 224 10.2.3 Sugden’s opportunity criterion . 226 10.2.4 Roemer’s equality of opportunity . 229 10.2.5 Sen’s capability approach . 232 10.3 Discussion and conclusion . 236 Conclusion 241 Bibliography 249 6 Contents Appendix 293 A Appendix to chapter 8 293 A.1 Additional specifications . 294 A.2 Residual diagnostics . 297 B Appendix to chapter 9 303 B.1 Additional descriptive statistics . 304 B.2 Additional reporting of results . 308 B.3 SEM: R Code . 316 Eidesstattliche Erklärung 319 Acknowledgements This thesis is the result of several years of doctoral research, and was accompanied by the valuable support of many people along the way. On the academic side, I am thankful to my supervisor Stephan Panther, who encouraged me from the first day to explore and follow my academic interests and gave me time and space to truly do so. He was a respectful and motivating superior, supervisor, and scientific mentor. His trust in my commitment to my research allowed me to move freely, explore hidden corners of our discipline, travel a lot, meet many people and have time for many different projects. All of these aspects shaped this thesis in important ways. Carlo D’Ippoliti, my second supervisor, accepted to get involved in a project that was already shaped in many regards. Nevertheless and all the more, he provided invaluable guidance with regards to all parts of this thesis, and engaged much more than I could have reasonably expected. His broad and deep understanding of many different literatures and empirical methods was of great help. I am very thankful for this support. Many parts of this thesis hugely benefited from comments by colleagues and friends. Sara El-Madani read large parts of the manuscript and pointed me towards a whole bunch of minor and major problems. Katharina Pohl was an extremely helpful, critical discussant of my topic as such and its normative implications in particular, both over the years and when the draft was finished. Her last-minute support is warmly acknowledged. My overall perspective on the topic was enhanced in important ways through my joint work with Claudius Gräbner on a related topic. His helpful attitude, from which I benefited many times, is much appreciated. Jonathan Mole helped me to revise my academic writing. My understanding of the models in chapter2 and, in fact, of the whole field benefited greatly from the 4th World Bank Equity Conference on Aspirations, Poverty and Inequality in 2014. I am thankful to Pedro Olinto for inviting me. 7 8 Acknowledgements Chapter8 as well as earlier versions of it have come a particularly long way. It was my first empirical exercise and took me to my first conferences. I am thankful for helpful comments and suggestions to François Bourguignon, Francisco H.G. Ferreira, Martin Förster, Alan Piper, Pasquale Tridico, and participants of the IBGE-IARIW Special Conference on ”Income, Wealth and Well-being in Latin America” (Rio de Janeiro, 2013), the EAEPE Summer School (Rome, 2013) and the 25th EAEPE Annual Conference (Paris, 2013). Pia Förster provided helpful research assistance. The Flensburg Tea Meeting provided helpful reflections on chapter9. Chapter 10 received lots of insightful comments at the XII. Buchenbach workshop 2015. I would like to thank Mark Kirstein, Marco Lehmann-Waffenschmidt, and Thomas Göllinger. Chapter 10 moreover benefited from helpful comments by anonymous reviewers. On the personal side of university life, I wish to thank Sara El-Madani, Maike Simon and Marlene Langholz-Kaiser for their friendship and support, in particular during the last months. Sara was the best colleague I could have hoped for, and sharing office with her will truly be missed. Marlene, Mika and their family shared their home with me many times. Maike’s friendship over the years and notably during the last days and hours cannot be emphasised enough. My parents, Monika and Thomas, deserve my gratitude for their continuous support of whatever aspirations I came up with. I learned from them that many aspirations can be achieved if one tries, that some aspirations deserve being revised, and that the highest aspirations are not always the best. My take on aspiration traps and what causes them has benefited from conversations with my mother, who is not only the best mother, but also a great social worker. Finally, I am thankful to Marc, for years of patient and impatient support. He found a fair balance between pushing my motivation and reminding me that there is more in life than aspirations. His critical real-world perspectives shaped this thesis in many ways. On a practical note, sitting in front of a computer would have been much less comfortable without his technical support and equipment. Practical and small things in our day-to-day lives often tend to be forgotten or overlooked. In particular over the last months, Marc took care of many little and not so little things. Many of them I am not even aware of, because my mind was elsewhere. But I know. List of Figures 2.1 Kahneman and Tversky’s value function . 42 2.2 The benefit from future wealth . 50 2.3 Satisfaction and frustration from aspirations at a given level of initial wealth . 51 2.4 Satisfaction and frustration at a given aspiration level and different growth rates of wealth . 52 5.1 Combinations of perceived self-efficacy and locus of control beliefs according to Bandura . 117 6.1 How do aspirations develop? An integrative framework . 131 7.1 Model estimating a mediation effect . 150 8.1 Response scores of group means by income groups, waves 1-6 . 169 8.2 Average response score over all observations per wave . 170 8.3 Variation of perceived control between income groups and GDP per capita . 172 9.1 Structural model . 188 9.2 Distribution of educational aspirations . 195 9.3 Grades attended, 1999-2009 . 196 9.4 Changes of individual aspirations between rounds 2 and 3 .