The importance of aspirations for economic decision making has recently gained attention in economics. In this paper the research team empirically test the theories of aspirations windows, gaps, and failures articulated in Appadurai (2004), Ray (2006), and Genicot and Ray (2015) using a unique dataset from rural Nepal. The Principal Investigator asks two questions: (1) What are the social drivers of aspirations formation?, and (2) How do aspirations influence future-oriented behavior? Our analysis suggests that the readily observable characteristics of one’s peers are quite important in forming aspirations for income, assets, status and education. The difference between current status and aspirations drives future-oriented economic behavior as predicted by theory: investment in the future increases with aspirations up to a certain point, but if the gap between one’s current status and one aspirations becomes too large, investment subsequently declines.
Paper: Social Drivers of Aspirations Formation and Failure in Rural Nepal