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Inflated Expectations and Natural Resource Booms: Evidence from Kazakhstan

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  • Gerhard Toews

Abstract

We use the exogenous variation in oil prices to study the negative effect of income aspirations on households' satisfaction with income. To evaluate the effect we use data on reported satisfaction with income from Kazakhstan's Household Budget Survey - a quarterly, unbalanced panel of households covering the period 2001-2005. Our results suggest that a 20% increase in the oil price decreased households' satisfaction with income by half a standard deviation within a year. We argue that the drop in satisfaction is due to peoples' inflated expectations. 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
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    References listed on IDEAS

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    More about this item

    Keywords

    Resource Boom; Conflict; Aspirations; Income Satisfaction;
    All these keywords.

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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