Aspirations and investments in rural Myanmar

Abstract

The aspirations gap is the distance between an individual’s current and aspired standard of livelihood. A growing theoretical literature predicts that aspirations both “too close” and “too far” away from current standards lead to less investment in the future. These theories imply an inverted U-shaped relationship between the aspirations gap and investments. I test this hypothesis and extend existing empirical findings to rural Myanmar by examining the relationship between the income aspirations gap and real estate investment choices. I find that income aspirations that are ahead, but not too far ahead, of current income levels provide the best incentive for investment. Analysis of heterogeneity highlights that this relationship is strongest for those with relatively low income and those who hold fatalistic beliefs. These findings suggest the presence of psychological constraints to poverty alleviation and development in rural Myanmar.

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Acknowledgments

I am grateful to Marc Bellemare, Jason Kerwin, Paul Glewwe, Bruce Wydick, Nicholas Magnan, Jane Sumner, Khandker Wahedur Rahman, and two anonymous reviewers for constructive feedback on this paper. I want to acknowledge the wonderful guidance and assistance of Duncan Boughton, Ellen Payongayong, Kyan Htoo, and Aung Hein when conducting field-work and collecting data used in this project. I am thankful for helpful feedback from participants of the 2019 Midwest International Economic Development Conference (MidDev) at the University of Wisconsin, Madison, the 2019 Agricultural and Applied Economics Association (AAEA) Meetings in Atlanta, GA, and the 2019 Sustainability and Development Conference at the University of Michigan. I am also thankful to the United States Agency for International Development (USAID) for generous funding, provided through the Feed the Future Innovation Lab for Food Security Policy at Michigan State Univeristy (RC104236 USAID Burma). I am also appreciative of support from the Doctoral Dissertation Fellowship (DDF) from the Graduate School at the University of Minnesota. The findings and conclusions in this manuscript are mine and should not be construed to represent any official USDA or US Government determination or policy. This research was conducted prior to my employment with the USDA. All errors are my own.

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Correspondence to Jeffrey R. Bloem.

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Bloem, J.R. Aspirations and investments in rural Myanmar. J Econ Inequal (2021). https://doi.org/10.1007/s10888-021-09478-7

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Keywords

  • Aspirations
  • Investments
  • Inequality
  • Poverty
  • Psychology

JEL Classification

  • D19
  • O18
  • R11
  • E71