Aspirations Failure and Well-Being Outcomes in Ethiopia

Tanguy Bernard

Stefan Dercon

Alemayehu Seyoum Taffesse

International Food Policy Research Institute

August 19, 2010

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Outline

Objectives and motivation Elements of the aspirations failure perspective Suggestive evidence Methodological Challenges Testing Strategy

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Motivation Development discourse and praxis focus on ‘opportunities’

Why do the poor not ‘invest’ when returns are and/or appear to be high? Ethiopians and fatalism?

A variety of mostly complementary explanations have been forwarded over the years. Low returns to investments – Example: no schools, lack of credit

(market failures); Unexploited opportunities due to lack of information/knowledge

about the opportunities/returns – Example: insufficient observable cases;

Social constraints dampen the economic attractiveness of investment opportunities – Example: egalitarian norms, very high taxation, excessive regulations’

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Motivation

Focus - ‘external circumstances’ , Constraints associated with the manifested attributes of

decision makers Identity issues: People’s choices are conditioned by their

sense of self – Example: stereotype roles; Psychological issues: impatience, commitment, and

psychological barriers and similar reasons identified by the behavioural economics – Example: loss aversion and the consequent preference for the status quo;

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Motivation

The present study adopts the aspirations failure approach which:

espouses a perspective akin to the fourth set of explanations outlined above;

attempts to blend external constraints that the poor face with the potential effect these constraints may have on the internal logic governing choice by them;

affords an alternative characterisation of what appears to be fatalism (Ethiopia)

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Objectives – Research Program

measure well-being aspirations and corresponding aspiration gaps,

ascertain the dimensions and size of aspiration window; identify individual, household, and community characteristics

that may impinge upon aspirations; establish the existence of aspirations failure, i.e., identify and

test the significance of aspirations gaps to economic behaviour

Better understanding of poverty dynamics in Ethiopia and possibly elsewhere.

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Elements of the Aspirations Perspective

What are Aspirations?

Aspirations have two distinctive aspects:

Future-oriented - are goals that can only be satisfied at some future time (differ from immediate gratifications);

Motivators - are goals individuals are willing, in principle, to invest time, effort or money in to attain (different from idle daydreams and wishes)

Note: the ‘willingness to invest’ is ‘potential’, or ‘conditional’Ref: Simon (1977), Selten (1999), Appadurai (2002), Ray (2003)

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Elements of the Aspirations Perspective

Why are aspirations important/useful?

Aspirations (or the capacity to aspire):

Reflect bounded rationality; Are socially determined (social interaction); Are distributed unevenly within communities.

Condition individual behaviour and well-being Useful device in analysing and/or addressing poverty

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Elements of the Aspirations Perspective

How do aspirations condition individual behaviour? Ray (2003)

Aspiration window: an individual’s cognitive world, his/her zone of ‘similar’, ‘attainable’

individuals; Reflects the information and economic opportunities of the local

environment; Multi-dimensional (‘similarity’);

Aspiration gap: difference between the aspired ‘state’ and current ‘state’ Conditions future-oriented behaviour (or effort)

A possible outcome is an aspiration failure - lack of pro-active behaviour (or ‘under-investment’) towards filling the aspiration gap

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Preliminary Results

Data

Small aspiration module was added to a rural household survey conducted by TANGO in 2007;

2290 individuals, 1290 households, 54 PAs, 9 Woredas, 5 Regional states;

Quantitative and qualitative components in the survey;

Intermediate Objectives

To establish whether members of Ethiopian rural households are willing and able to answer aspiration-related questions;

To conduct some illustrative analyses that can show whether the proposed research agenda is significant and feasible.

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Preliminary Results

Indicators of aspirations (or aspiration levels)

Question - Perception regarding the degree of control respondents have over their 'life outcomes'

Q 15: For each of the following, please tell me which of the two propositions you most agree with:

a. 1: “Each person is primarily responsible for his/her success or failure in life”

2: “One’s success or failure in life is a matter of his/her destiny”

b. 1: “To be successful, above all one needs to work very hard”

2: “To be successful, above all one needs to be lucky”

Response – a third believe they have little control over and/or responsibility for their own ‘life’

Other surveys - generated highly comparable results, higher proportions (40%) for women

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Preliminary Results

Indicators of aspirations gap

Questions – current, past, and comparative happiness of respondentsResponse – majority happy or very happy (71 percent)

Questions – desire to change income-earning activity or migrate to improve ‘standard of living’Response – majority do not want to change primary income-earning activity or move in order to improve ‘standard of living’

Observation – narrow aspiration gap

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Preliminary Results

Indicators of aspirations window

For 90% of the respondents, their ‘role model’ lives in the same Kebele;

Respondent and ‘role model’ speak the same language and have the same religion in more than 70 percent of the cases (Siltie speakers and Protestants are the exceptions)

92% of all the household heads in the sample were born in their current village;

Observation – narrow aspirations window

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Preliminary Results

Indicators of aspirations failure

QUESTION 21: A banker came to you and offered to lend you any amount of money you ask…a. How much would you ask for if the loan was payable in 1 year?

b. How much would you ask for if the loan was payable in 5 years?c. How much would you ask for if the loan was payable in 10 years?

Statistical analysis results

Demand for loans – impact of aspirations; controls for gender, age, schooling, disability, village-level characteristics

Those who believe in ‘personal responsibility’ have 13% higher demand for 10-year loan relative to the mean (9% for both 1-year and 5-year loans)

Observation – aspirations failure appears to be present 04/11/23 14

Observations

Some of the results were replicated using other datasets. Preliminary, though strong, empirical evidence that demonstrates

the relevance of the “aspiration framework” to the analysis of poverty dynamics;

The results suggest that low aspirations/gap characterize a large proportion of the surveyed population and may significantly influence their future-oriented behaviour.

Therefore, more rigorous and targeted analysis is justified.

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Methodological Challenges

Measuring Aspirations

Identification issues

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Measurement issues

Aspirations are not directly observable Revealed by observed behavior: interpretation issues

Elicited using subjective questions: measurement issues

Limits to subjective assessment: subjects’ willingness to report private knowledge, evaluation apprehension,

and subject role playing

attributes of the instrument used: prior questions (anchoring), the number of categories on the rating scale, the adjectives that are used as the endpoints of the rating scale, and the adverbs that describe scale categories.

(e.g. Delavande et al. (2009), Bertrand and Mullainathan (2001) for some reviews)

Measurement issues

Desirable features of a measure/ instrument Validity: Is it really aspirations that are being measured? Reliability: Can the measure be trusted to draw comparisons? Usability: Can it be implemented in ‘standard’ household surveys?

Remaining measurement error may affect estimation of relationships (e.g. Betrand and Mullainathan, 2001): Attenuation bias (aspiration as an explanatory variable) Biased estimates (aspiration as an explanatory variable) Loss in precision (aspiration as a dependent variable)

Use experimental design, different data collection mechanism, panel data).

Validity Tests

Construct validity:

Aspirations determine future oriented behavior:

hypothetical credit demand, use of additional

resources;

Individuals with comparable levels of determinants of aspirations have positively correlated aspiration levels

predictive power of gender/age/education/village

categories, use peer report on a respondent’s aspiration

Reliability Tests

Test-retest - Do results vary upon repeated measures?

Subject reliability - Do the results vary with respondent’s mood, fatigue

etc.?

Observer reliability - Do the results vary with enumerator’s ability?

Instrument reliability - To what extent do results vary with framing,

wording of questions?

Observations Attempt to design an instrument before collecting data useful;

Instrument works well for aspiration levels;

Further tests needed with respect to aspiration gaps and windows;

Identification issues

individual characteristics affect aspirations, aspiration windows and behaviour (e.g. schooling levels, wealth, and family background),

Particularly the endogeneity of the aspiration window a key hurdle

Investment ‘cause’ aspirations (e.g. the successful investor may in turn revise his/her aspiration to a higher level), or

aspirations ‘cause’ investment – the one we aim to identify.

An experimental design helpful to test the link between aspiration window, aspirations and aspirations failures.

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Measurement and Testing Strategy Collaboration

CARE Ethiopia and its Village Savings and Loans Associations (VSLAs) a village-level program to encourage people save more in rural Ethiopia;

Deploy 10 specifically designed documentaries (SEVEN Fund financed the preparation via a competitive grant) ‘success stories’ of men and women from rural Ethiopia. ‘ordinary’ people, in ‘ordinary’ villages, that have managed to pull

themselves out of poverty. Use a non-aspiration al ‘movie’ as placebo; Include a sub-sample of no treatment households; Randomize access to screenings – villages, households: Randomize intensity of treatment at ‘window’ level (i.e., village level) Look at outcome:

Aspiration measures Participation in the VSLA program implemented by CARE Ethiopia

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Treatment design

Outcome variables Changes in aspirations (linked with measurement) Participation in VSLAs (whether, how much) Other dimensions of future-oriented behaviour (time allocation, saving...)

Treatment Watch documentary Aspiration window members watching documentaries Address endogeneity by random allocation of invitations and intensity per

village

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Sequence

Household and individual

survey:Aspirations +

Xs

Random allocation of invitation to

documentaries /movies

Screening documentaries

Re-survey: Aspirations

Re-survey: Aspirations + take-up rate

Follow-up take up in CARE’s M&E

system

Measurement instrument Consider 4 (likely related) dimensions

yearly income from all sources Unproductive domestic assets: one’s aspiration in terms of living standard Children’s education level measured by completed years of schooling social status : percentage of individuals in one’s community who would

ask for one’s advice before taking any significant decision.

Common unit = dimension-free measures:relative distance to an exogenously setmaximum Helps framing (no Haile Gebre Selassie) Same for all individuals ( not determinant in itself, but limits cross-survey comparisons)

Aggregation: individual-specific weights

max, ,

, max min

d i d id i

d d

M za

M M

, ,i d i d id

A w a

16 years of education – completed university

8 years of education – completed second cycle

0 years of education

4 Education of eldest child

What is the level of education that your oldest child currently has?What is the level of education that you would like your oldest child to achieve?What is the level of education that you think your oldest child will achieve?What is the maximum level of education that a person can have in your village?What is the minimum level of education that a person can have in your village?

An Example

Identification Collect information on other possible explanations for lack of

future-oriented behaviour Low returns to investments Lack of information/knowledge Social constraints Other psychological constraints

Use randomization to accommodate possible ‘confounders’

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Identification

Randomization - villages 80 villages randomly selected from among those with 50-100 households; Each village randomly assigned to ‘documentary’ or ‘placebo’;

Screen sites are formed by 4 equidistant villages

Randomization - households 6 HHs per village randomly selected to be surveyed but not invited to a

screening 6 HHs per village randomly selected to be surveyed and invited to a see the

documentary 6 HHs per village randomly selected to be surveyed and invited to a see the

‘movie’ 18 HHs per village randomly selected to be invited to a see the documentary or

the ‘movie’ depending on whether the village was randomly assigned as a ‘documentary’ or ‘placebo’ village;

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Current Status

Survey begins today

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