IDEAS home Printed from https://ideas.repec.org/a/pal/eurjdr/v35y2023i6d10.1057_s41287-023-00582-0.html
   My bibliography  Save this article

Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?

Author

Listed:
  • Mequanint B. Melesse

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT))

  • Amos Nyangira Tirra

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT))

  • Yabibal M. Walle

    (German Institute of Development and Sustainability (IDOS))

  • Michael Hauser

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT)
    University of Natural Resources and Life Sciences)

Abstract

Aspirations have recently received increased attention in the analysis of poverty and its dynamics. The argument is that aspirations provide reference points for individuals’ forward-looking decisions and behaviours. Understanding of what determines aspirations is vitally important to design development interventions that can raise aspirations. In this paper, we analyse whether financial literacy is associated with individuals’ aspirations. Using data from more than 2000 Tanzanian households, we find a robust positive correlation between financial literacy and aspirations. Our results are robust to using alternative financial literacy measure, controlling for extensive covariates and non-cognitive traits, and sensitivity analyses to omitted variables. Overall, our findings suggest that aspirations could be influenced to improve poor individuals’ future investments and forward-looking behaviour.

Suggested Citation

  • Mequanint B. Melesse & Amos Nyangira Tirra & Yabibal M. Walle & Michael Hauser, 2023. "Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(6), pages 1294-1321, December.
    • Handle: RePEc:pal:eurjdr:v:35:y:2023:i:6:d:10.1057_s41287-023-00582-0
    DOI: 10.1057/s41287-023-00582-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41287-023-00582-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41287-023-00582-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Claudia Martínez A. & Esteban Puentes, 2018. "Micro-entrepreneurship Debt Level and Access to Credit: Short-Term Impacts of a Financial Literacy Program," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(4), pages 613-629, September.
    2. Joanna Chilemba & Catherine Ragasa, 2020. "The Impact on Farmer Incomes of a Nationwide Scaling Up of the Farmer Business School Program: Lessons and Insights from Central Malawi," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(4), pages 906-938, September.
    3. John D. Hey, 2018. "Why We Should Not Be Silent About Noise," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 13, pages 309-329, World Scientific Publishing Co. Pte. Ltd..
    4. James J. Heckman & Tomas Jagelka & Tim Kautz, 2019. "Some Contributions of Economics to the Study of Personality," Working Papers 2019-069, Human Capital and Economic Opportunity Working Group.
    5. Kaiza R. Kaganzi & Aida Cuni-Sanchez & Fatuma Mcharazo & Emanuel H. Martin & Robert A. Marchant & Jessica P. R. Thorn, 2021. "Local Perceptions of Climate Change and Adaptation Responses from Two Mountain Regions in Tanzania," Land, MDPI, vol. 10(10), pages 1-22, September.
    6. Guildo W. Imbens, 2003. "Sensitivity to Exogeneity Assumptions in Program Evaluation," American Economic Review, American Economic Association, vol. 93(2), pages 126-132, May.
    7. Travis J. Lybbert & Bruce Wydick, 2018. "Poverty, Aspirations, and the Economics of Hope," Economic Development and Cultural Change, University of Chicago Press, vol. 66(4), pages 709-753.
    8. Miriam Bruhn & Luciana de Souza Leão & Arianna Legovini & Rogelio Marchetti & Bilal Zia, 2016. "The Impact of High School Financial Education: Evidence from a Large-Scale Evaluation in Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 8(4), pages 256-295, October.
    9. Christopher Boyce & Alex Wood & Nattavudh Powdthavee, 2013. "Is Personality Fixed? Personality Changes as Much as “Variable” Economic Factors and More Strongly Predicts Changes to Life Satisfaction," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 111(1), pages 287-305, March.
    10. Kosec, Katrina & Mo, Cecilia Hyunjung, 2017. "Aspirations and the Role of Social Protection: Evidence from a Natural Disaster in Rural Pakistan," World Development, Elsevier, vol. 97(C), pages 49-66.
    11. Karen Macours & Renos Vakis, 2014. "Changing Households' Investment Behaviour through Social Interactions with Local Leaders: Evidence from a Randomised Transfer Programme," Economic Journal, Royal Economic Society, vol. 0(576), pages 607-633, May.
    12. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    13. Page, Lionel & Levy Garboua, Louis & Montmarquette, Claude, 2007. "Aspiration levels and educational choices: An experimental study," Economics of Education Review, Elsevier, vol. 26(6), pages 747-757, December.
    14. Anke Becker & Thomas Deckers & Thomas Dohmen & Armin Falk & Fabian Kosse, 2012. "The Relationship Between Economic Preferences and Psychological Personality Measures," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 453-478, July.
    15. Ravi Nandi & Swamikannu Nedumaran, 2021. "Understanding the Aspirations of Farming Communities in Developing Countries: A Systematic Review of the Literature," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 809-832, August.
    16. Carpena, Fenella & Zia, Bilal, 2020. "The causal mechanism of financial education: Evidence from mediation analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 143-184.
    17. Matthias Sutter & Michael Weyland & Anna Untertrifaller & Manuel Froitzheim, 2020. "Financial literacy, risk and time preferences - Results from a randomized educational intervention," Working Papers 2020-27, Faculty of Economics and Statistics, Universität Innsbruck.
    18. Jennifer Golan & Jing You, 2021. "Raising Aspirations of Boys and Girls through Role Models: Evidence from a Field Experiment," Journal of Development Studies, Taylor & Francis Journals, vol. 57(6), pages 949-979, June.
    19. Chiapa, Carlos & Garrido, José Luis & Prina, Silvia, 2012. "The effect of social programs and exposure to professionals on the educational aspirations of the poor," Economics of Education Review, Elsevier, vol. 31(5), pages 778-798.
    20. Ravi Nandi & Swamikannu Nedumaran, 2021. "Correction to: Understanding the Aspirations of Farming Communities in Developing Countries: A Systematic Review of the Literature," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 1141-1141, August.
    21. Daniel Ayalew Mekonnen & Nicolas Gerber, 2017. "Aspirations and food security in rural Ethiopia," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 9(2), pages 371-385, April.
    22. Tomáš Jagelka, 2020. "Are Economists’ Preferences Psychologists’ Personality Traits? A Structural Approach," ECONtribute Discussion Papers Series 014, University of Bonn and University of Cologne, Germany.
    23. Melesse, Mequanint B. & Cecchi, Francesco, 2017. "Does Market Experience Attenuate Risk Aversion? Evidence from Landed Farm Households in Ethiopia," World Development, Elsevier, vol. 98(C), pages 447-466.
    24. Justine S. Hastings & Brigitte C. Madrian & William L. Skimmyhorn, 2013. "Financial Literacy, Financial Education, and Economic Outcomes," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 347-373, May.
    25. Pieter Serneels & Stefan Dercon, 2021. "Aspirations, Poverty, and Education. Evidence from India," Journal of Development Studies, Taylor & Francis Journals, vol. 57(1), pages 163-183, January.
    26. Patricio S. Dalton & Sayantan Ghosal & Anandi Mani, 2016. "Poverty and Aspirations Failure," Economic Journal, Royal Economic Society, vol. 126(590), pages 165-188, February.
    27. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    28. Cobb-Clark, Deborah A. & Kassenboehmer, Sonja C. & Schurer, Stefanie, 2014. "Healthy habits: The connection between diet, exercise, and locus of control," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 1-28.
    29. Kai Mausch & Dave Harris & Javier Revilla Diez, 2021. "Rural Aspirations: Reflections for Development Planning, Design and Localized Effects," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 795-808, August.
    30. Marianne Bertrand & Sendhil Mullainathan & Eldar Shafir, 2004. "A Behavioral-Economics View of Poverty," American Economic Review, American Economic Association, vol. 94(2), pages 419-423, May.
    31. Garance Genicot & Debraj Ray, 2017. "Aspirations and Inequality," Econometrica, Econometric Society, vol. 85, pages 489-519, March.
    32. Heineck, Guido & Anger, Silke, 2010. "The returns to cognitive abilities and personality traits in Germany," Labour Economics, Elsevier, vol. 17(3), pages 535-546, June.
    33. Jehovaness Aikaeli & David Garcés‐Urzainqui & Kenneth Mdadila, 2021. "Understanding poverty dynamics and vulnerability in Tanzania: 2012–2018," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 1869-1894, November.
    34. Gottlieb, Jessica & Kosec, Katrina, 2019. "The Countervailing Effects of Competition on Public Goods Provision: When Bargaining Inefficiencies Lead to Bad Outcomes," American Political Science Review, Cambridge University Press, vol. 113(1), pages 88-107, February.
    35. Healy, Andrew & Kosec, Katrina & Mo, Cecilia Hyunjung, 2017. "Economic Development, Mobility, and Political Discontent: An Experimental Test of Tocqueville’s Thesis in Pakistan," American Political Science Review, Cambridge University Press, vol. 111(3), pages 605-621, August.
    36. Annamaria Lusardi, 2019. "Financial literacy and the need for financial education: evidence and implications," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-8, December.
    37. Christopher B. Barrett & Michael R. Carter, 2013. "The Economics of Poverty Traps and Persistent Poverty: Empirical and Policy Implications," Journal of Development Studies, Taylor & Francis Journals, vol. 49(7), pages 976-990, July.
    38. Salvatore di Falco & Erwin Bulte, 2011. "A Dark Side of Social Capital? Kinship, Consumption, and Savings," Journal of Development Studies, Taylor & Francis Journals, vol. 47(8), pages 1128-1151, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ross, Phillip H. & Glewwe, Paul & Prudencio, Daniel & Wydick, Bruce, 2021. "Developing educational and vocational aspirations through international child sponsorship: Evidence from Kenya, Indonesia, and Mexico," World Development, Elsevier, vol. 140(C).
    2. Cecchi, Francesco & Garcia, Adriana & Lensink, Robert & Wydick, Bruce, 2022. "Aspirational hope, dairy farming practices, and milk production: Evidence from a randomized controlled trial in Bolivia," World Development, Elsevier, vol. 160(C).
    3. Jeffrey R. Bloem, 2021. "Aspirations and investments in rural Myanmar," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(4), pages 727-752, December.
    4. Tabe-Ojong, Martin Paul Jr & Heckelei, Thomas & Baylis, Kathy, 2020. "Collective action and smallholder rural households: Implications for income and asset aspirations," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304580, Agricultural and Applied Economics Association.
    5. Kaiser, Tim & Lusardi, Annamaria & Menkhoff, Lukas & Urban, Carly, 2022. "Financial education affects financial knowledge and downstream behaviors," Journal of Financial Economics, Elsevier, vol. 145(2), pages 255-272.
    6. Tabe-Ojong, Jr., Martin Paul & Godana, Guyo, 2022. "Are Agro-clusters Pro-Poor? Evidence from Ethiopia," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322432, Agricultural and Applied Economics Association.
    7. Kai Mausch & Dave Harris & Javier Revilla Diez, 2021. "Rural Aspirations: Reflections for Development Planning, Design and Localized Effects," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 795-808, August.
    8. Ross, Phillip H., 2019. "Occupation aspirations, education investment, and cognitive outcomes: Evidence from Indian adolescents," World Development, Elsevier, vol. 123(C), pages 1-1.
    9. Tabe-Ojong, Martin Paul Jr & Heckelei, Thomas & Rasch, Sebastian, 2022. "Aspirations and Investments in Livestock: Evidence of an aspiration failure in Kenya," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322435, Agricultural and Applied Economics Association.
    10. Abay, Kibrom A. & Blalock, Garrick & Berhane, Guush, 2017. "Locus of control and technology adoption in developing country agriculture: Evidence from Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 98-115.
    11. Moya, Andrés & Carter, Michael R., 2019. "Violence and the formation of hopelessness: Evidence from internally displaced persons in Colombia," World Development, Elsevier, vol. 113(C), pages 100-115.
    12. Kibrom A. Abay & Guush Berhane & Garrick Blalock, 2018. "Locus of Control and Technology Adoption in Africa: Evidence from Ethiopia," Working Papers PMMA 2018-04, PEP-PMMA.
    13. Sung Soo Lim & Jongwook Lee, 2022. "Aspirations, Human Capital Investment, and the Intergenerational Transmission of Poverty in Indonesia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(1), pages 377-412, July.
    14. Sung Soo Lim, 2020. "The Effects of Chronic Illness on Aspirations and Subjective Wellbeing," Journal of Happiness Studies, Springer, vol. 21(5), pages 1771-1793, June.
    15. Katrina Kosec & Kamiljon Akramov & Bakhrom Mirkasimov & Jie Song & Hongdi Zhao, 2022. "Aspirations and women's empowerment: Evidence from Kyrgyzstan," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(1), pages 101-134, January.
    16. Tabe-Ojong, Martin Paul Jr. & Nshakira-Rukundo, Emmanuel, 2021. "Religiosity and parental educational aspirations for children in Kenya," World Development Perspectives, Elsevier, vol. 23(C).
    17. Pieter Serneels & Stefan Dercon, 2021. "Aspirations, Poverty, and Education. Evidence from India," Journal of Development Studies, Taylor & Francis Journals, vol. 57(1), pages 163-183, January.
    18. González-Jiménez, Víctor, 2022. "Social status and motivated beliefs," Journal of Public Economics, Elsevier, vol. 211(C).
    19. Kaiser, Tim & Menkhoff, Lukas, 2022. "Active learning improves financial education: Experimental evidence from Uganda," Journal of Development Economics, Elsevier, vol. 157(C).
    20. Martin Paul Jr. Tabe-Ojong & Thomas Heckelei & Kathy Baylis, 2021. "Aspiration Formation and Ecological Shocks in Rural Kenya," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 833-860, August.

    More about this item

    Keywords

    Aspiration; Financial literacy; Poverty; Non-cognitive trait; Tanzania;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:eurjdr:v:35:y:2023:i:6:d:10.1057_s41287-023-00582-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.