IDEAS home Printed from https://ideas.repec.org/p/oxf/oxcrwp/109.html
   My bibliography  Save this paper

Inflated Expectations and Natural Resource Booms: Evidence from Kazakhstan

Author

Listed:
  • Gerhard Toews

Abstract

In this paper we identify the effect of an oil price boom on households' satisfaction with income. In a natural experiment the increase in the oil price is used as an exogenous shock affecting households located in the oil and gas rich region of Kazakhstan. to evaluate the effect we use the Household Budget Survery of Kazakhstan from 2001 to 2005, a quarterly, unbalanced panel of 12,000 households. An important feature of this survey is that household heads were asked to report their "satisfaction with household income" on a scale from 1 to 5. Our results suggest that a 10% increase in the oil price decreased household's satisfaction with income by 2% with a lag of two quarters. We argue that this is due to peoples' inflated expectations regarding their income. this result highlights the importance of managing expectations in a rapidly changing economic environment.

Suggested Citation

  • Gerhard Toews, 2013. "Inflated Expectations and Natural Resource Booms: Evidence from Kazakhstan," OxCarre Working Papers 109, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:109
    as

    Download full text from publisher

    File URL: http://www.oxcarre.ox.ac.uk/images/stories/papers/ResearchPapers/oxcarrerp2013109.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. McBride, Michael, 2010. "Money, happiness, and aspirations: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 262-276, June.
    2. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 143-168, Spring.
    3. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-238, January.
    4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    5. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
    6. Kalyuzhnova, Yelena & Kambhampati, Uma, 2008. "The determinants of individual happiness in Kazakhstan," Economic Systems, Elsevier, vol. 32(3), pages 285-299, September.
    7. Boris Najman & Richard Pomfret & Gael Raballand & Patricia Sourdin, 2005. "How are Oil Revenues redistributed in an Oil Economy? The case of Kazakhstan," Development and Comp Systems 0512012, University Library of Munich, Germany.
    8. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
    9. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    10. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    11. Akram Esanov & Karlygash Khuralbayeva, 2010. "Riccardian Curse of the Resource Boom: The case of Kazakhstan 2000-2008," OxCarre Working Papers 043, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    12. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Resource Booms; Conflicts; Reference Point Formation;

    JEL classification:

    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:oxf:oxcrwp:109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Melis Boya). General contact details of provider: http://edirc.repec.org/data/oxcaruk.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.