Aspiration Adaptation in Resource-Constrained Environments
We use a multi-country field experiment that combines random variation at the treatment level with exogenous variation in the length of exposure to treatment to test the effect of a slum-housing intervention on the evolution of housing aspirations of untreated co-resident neighbors over time. Initially after treatment, we observe a huge control- treatment housing gap in favor of treated units. As a result, non-treated households' aspirations to upgrade their dwelling are significantly higher compared to the treatment group, suggesting that they aspire to “keep-up” with the treated Joneses', as in standard models of peer effects. However, eight months later, no effects are found on housing investments and the aspirational effect completely disappears. Estimates based on a structural model of aspiration adaptation show that the decay rate is 38% per month. Our evidence suggests that simply fostering higher aspirations may be insufficient to encourage forward-looking behavior among the poor.
We thank Rajeev Dehejia, Eduardo Engel, Michael Gechter, Mariaflavia Harari, Daniel Lederman and Martin Rotemberg for their valuable comments. We also thank seminar participants at LACEA 2017 and 2018 NBER Summer Institute. The experiment over which this paper is based on is registered at the AEA RCT Registry under the code AEARCTR-0002271. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Galiani, Sebastian & Gertler, Paul J. & Undurraga, Raimundo, 2021. "Aspiration adaptation in resource-constrained environments," Journal of Urban Economics, Elsevier, vol. 123(C). citation courtesy of