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Aspirations and Inequality

Author

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  • Garance Genicot
  • Debraj Ray

Abstract

This paper develops a theory of socially determined aspirations, and the interaction of those aspirations with growth and inequality. The interaction is bidirectional: economy-wide outcomes determine individual aspirations, which in turn determine investment incentives and social outcomes. Thus aspirations, income and the distribution of income evolve jointly. When capital stocks lie in some compact set, steady states distributions must exhibit inequality and are typically clustered around local poles. When sustained growth is possible, initial histories matter. Either there is convergence to an equal distribution (with growth) or there is perennial relative divergence across clusters, with within-cluster convergence. A central feature that drives these results is that aspirations that are moderately above an individual’s current standard of living tend to encourage investment, while still higher aspirations may lead to frustration.

Suggested Citation

  • Garance Genicot & Debraj Ray, 2014. "Aspirations and Inequality," NBER Working Papers 19976, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19976
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    References listed on IDEAS

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    1. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2007. "Aspirations, Habit Formation, and Bequest Motive," Economic Journal, Royal Economic Society, vol. 117(520), pages 813-836, April.
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    Citations

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    Cited by:

    1. Modalsli, Jørgen Heibø, 2011. "Polarization, Risk and Welfare in General Equilibrium," Memorandum 27/2011, Oslo University, Department of Economics.
    2. Dalton, Patricio & Gonzalez Jimenez, Victor & Noussair, Charles, 2016. "Exposure to Poverty and Productivity," Discussion Paper 2016-027, Tilburg University, Center for Economic Research.
    3. Mekonnen, Daniel & Gerber, Nicolas, 2015. "The Effect of Aspirations on Agricultural Innovations in Rural Ethiopia," 2015 Conference, August 9-14, 2015, Milan, Italy 211680, International Association of Agricultural Economists.
    4. Lionel Jeusette & Philip Verwimp, 2017. "Childhood aspirations, occupational outcomes and exposure to violence: Evidence from Burundi," HiCN Working Papers 247, Households in Conflict Network.
    5. Travis J. Lybbert & Bruce Wydick, 2017. "Hope as Aspirations, Agency, and Pathways: Poverty Dynamics and Microfinance in Oaxaca, Mexico," NBER Chapters,in: The Economics of Poverty Traps National Bureau of Economic Research, Inc.
    6. Melissa S. Kearney & Phillip B. Levine, 2016. "Income Inequality, Social Mobility, and the Decision to Drop Out of High School," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 333-396.
    7. 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.
    8. Ilyana Kuziemko & Ryan W. Buell & Taly Reich & Michael I. Norton, 2011. ""Last-place Aversion": Evidence and Redistributive Implications," NBER Working Papers 17234, National Bureau of Economic Research, Inc.
    9. Anukriti, S & Chakravarty, Abhishek, 2015. "Political Aspirations in India: Evidence from Fertility Limits on Local Leaders," IZA Discussion Papers 9023, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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