Much of the literature on chronic poverty focuses on external constraints as impediments to escaping the poverty trap. A new strand of research suggests psychological factors such as a lack of aspirations and low self-esteem could reinforce these traps. This column presents results from an ongoing study that demonstrates that it is possible to change these psychological factors.

The usual starting point for the analysis of chronic poverty is that resource constraints drive a poverty trap. A newer strand of research (for example Appadurai 2004) goes beyond conventional accounts of deprivation and disadvantage, and suggests that poverty traps could also be formed by psycho-social constraints internal to the individual such as lack of hope and/ or self-confidence, a sense of shame, and ‘aspirations failure’. Aspirations failure refers to the condition of a person who does not aspire to escape poverty although poverty is escapable with additional effort that is within their means.

This column presents preliminary evidence on the impact of raising aspirations of a marginalised community of sex workers in the city of Kolkata in India.

The poverty trap: External or internal constraints?

Chronic poverty refers to the multi-dimensional processes that trap people in poverty over long periods. Chronic poverty, defined as the incapability to fulfil basic needs for a period of more than five years, is one of the oldest problems faced by humanity. More than 35% of the poverty in India is chronic (Chronic Poverty Report 2004-2005) and continues to do so today.

An extensive literature on poverty traps (surveyed by Azariadis and Stachurski 2004 and Azariadis 2004) has focused on the external constraints that may keep people poor. Possible candidates include malfunctioning credit and insurance markets, status quo biases that hinder investment and innovation, and ‘bad’ institutions such as corruption. While any of these can make a good story, data has not pointed decisively towards any one of these in particular (Azariadis and Stachurski 2004).

Besides, the theory on poverty traps does not adequately take into account the mutually reinforcing nature of the relationship between poverty and psycho-social constraints such as lack of self-confidence and lack of aspiration. These are, however, well documented in the psychology, sociology and anthropology literatures.

These literatures show that poverty, with social exclusion, has detrimental self-reinforcing effects on self-perception, self-confidence and lack of aspirations. Wilson (1987) offers clear evidence of the ‘social exclusion-lack of aspirations-poverty’ link first observed in urban ghettos in the United States in 1970. Appadurai (2004) argues that the poor may lack the capacity to aspire to “contest and alter the conditions of their own poverty.” For Appadurai, the “capacity to aspire” involves not only setting goals but also knowing how to reach them. Ray (2003) argues that poverty and failure of aspirations may be reciprocally linked in a self-sustaining trap. Indeed, “poverty stifles dreams, or at least the process of attaining dreams.” Are internal constraints a cause of poverty, or consequence? Do the poor remain deprived because they lack hope, motivation and aspirations or, as Bernard et al. (2011) claim, is it merely that “the poor may exhibit the same basic weaknesses and biases as do people from other walks of life, except that in poverty ... the same behaviours ... lead to worse outcomes”?

When economists ignore these issues, the result is a theoretical gap in the economic literature and a practical obstacle to anti-poverty policies.

How should we think about aspirations?

Dalton et al. (2012) supply a theoretical framework that links internal constraints and poverty traps1. Their starting point is the assumption that individuals underestimate how their aspirations may evolve over their lifetime as a consequence of their own effort2. The rich and poor alike suffer from this bias, but we will argue that it has greater impact on the poor.

A key factor that makes aspirations failure more likely for those that are already poor is the role of luck. Poverty imposes an additional constraint on the poor - they face much greater downside risk from bad luck in their lives. The greater downside risk lowers their expected benefit of investing effort into any goal: when your child is performing poorly in school, and you are worried about whether the harvest will give enough to eat, you think twice about hiring a remedial teacher. Lower effort, driven by higher risk, increases the odds of low performance and feeds into lower aspiration and achievement in the long run.

‘Dream building’

An ongoing project in Kolkata is working to raise the aspirations of a marginalised group in society: sex workers. Given the social stigma attached to the sex trade, particularly in India, many sex workers suffer from a loss of hope and a sense of defeat. The training programme, called ‘Dream Building’, is being carried out in collaboration with the Durbar Foundation, a non-governmental organisation in Kolkata. The programme aims to give sex workers a renewed sense that they are as entitled as others to hope and to aspire, to teach them how to work towards these aspirations, and to develop a positive, proactive outlook on the future. In eight sessions, experienced trainers use novel methods of discussion and engagement with the subjects. Some of the trainers are themselves former sex workers who have reinvented their lives and careers and thus serve as role models for the participants.

Preliminary evidence on aspirations

Along with my co-investigators3, I undertook a small-scale pilot study of the project between February and July 2011. A sample of 34 sex workers was randomly selected and interviewed for the study in the localities of Khidirpore and Kalighat4. For comparison, eight other sex workers who had not been exposed to the workshops were interviewed. The pilot focused on outcome variables related to behavioural and psychological measures, such as opinion about oneself, sense of shame (arising from sex work as a profession), feeling of discrimination, locus of control, decision-making, and mobility5.

Comparing psychological outcomes before and after workshops⁶

It is found that being exposed to the dream-building workshops improves the sense of self-worth in women — it reduces the chances of these women thinking of themselves as being a fallen woman or a sinner by one-third. Workshop participants are also significantly (by around 30%) less likely to feel ashamed of their occupation. Following the workshops, these women are also significantly (by around 30%) more likely to feel discriminated against, which might be reflective of their heightened sense of self-worth. The impact of the workshops across the two localities appears to have been the same for these three outcomes.

The intervention also improved these women’s self-confidence and strengthened their belief that their life was under their control and increased their sense of mobility Given that nearly all sample women were already making most decisions on their own before the workshops, it is not too surprising that the intervention does not appear to significantly affect decision-making with regard to financial matters, the future of their children, personal purchases, health, condom usage, etc.

Comparing outcomes with and without workshops

When the sample of 34 women who attended the workshops is compared with the eight women who did not, the results are qualitatively similar to those reported in the preceding two paragraphs (comparison of outcomes before and after workshops for the 34 women).

Concluding thoughts

Bandura (2009) has said: “Failure to address the psychosocial determinants of human behaviour is often the weakest link in social policy initiatives. Simply providing ready access to resources does not mean that people will take advantage of them.”

Pro-poor policy interventions should aim to alter internal constraints (such as beliefs and aspirations), in addition to providing resources to relax external constraints. Changing beliefs is vital to break the failure of aspirations that can be found in poverty traps.

The pilot study discussed in this column has been extended to include a scaled up piece of fieldwork (with nearly 600 participants) to assess the impact of ‘Dream Building’ on the beliefs and choices of participants. This will provide evidence for the link between raising aspirations and improved outcomes, and will be a first step towards calculating the costs and benefits of interventions such as ‘Dream Building’.

Notes:

1. Other relevant literature includes Banerjee and Mullainathan (2010), Bogliacino and Ortoleva (2011), and Genicot and Ray (2011).
2. Survey evidence indicates that people underestimate how preferences evolve as their income changes over their lifetime (Easterlin 2001); migrants underestimate how their preferences adapt with their location — ending up less happy than rural and urban non-migrants (Knight and Gunatilaka 2008).
3. Sanchari Roy (CAGE), Anandi Mani (CAGE), Sandip Mitra (ISI Kolkata) and Smarajit Jana (Durbar Foundation). The pilot study has been scaled up to over 500 participants, and at the time of writing the data collection is being analysed.
4. The pilot study has since been scaled up to over 500 participants. The data from the scaled-up study is now being analysed.
5. Each of the outcome measures is constructed as a binary variable based on a series of questions that were asked in surveys relating to the issue in question. More details on the survey questionnaire are available on request.
6. For detailed of the results reported here, please see Chapter 6, of the CAGE Policy report, “The Design of Pro-Poor Policies” available at Click Here

Further Reading

• Appadurai, A (2004), ´The Capacity to Aspire´, in Culture and Public Action, Edited by Rao, V and Walton, M, Washington, DC: World Bank.
• Azariadis, C and Stachurski, J (2004), ´Poverty Traps´, in Handbook of Economic Growth, Edited by Aghion, P and Durlauf, S Amsterdam: Elsevier B V
• Azariadis, C (2004), ´The Theory of Poverty Traps: What have we Learned?´ in Poverty Traps, Edited by Bowles, S, Durlauf, S and Ho, K Princeton: Princeton University Press.
• Bandura, A (2009), “Social Learning Theory Goes Global.” The Psychologist. June Issue. 504-509.
• Banerjee A V and Mullainathan, S (2010), ´The Shape of Temptation: Implications for the Economic Lives of the Poor´, NBER Working Paper No. 15973.
• Bogliacino, F and Ortoleva, P (2011), ´Aspirations and Growth: a Model where the Income of Others Acts as a Reference Point´, Mimeo. Caltech.
• Chronic Poverty Research Centre (2005) ´Chronic Poverty Report 2004-05: Escaping Poverty Traps´, The Chronic Poverty Research Centre, University of Manchester. http://www.chronicpoverty.org/uploads/publication_files/CPR1_ReportFull.pdf.
• Dalton, P, Ghosal, S and Mani, A (2012), ´Poverty and Aspirations Failure´, CAGE Working Paper No 22. University of Warwick.
• Easterlin, R A (2001), “Income and happiness: towards a unified theory.” Economic Journal, 111, 465-84.
• Genicot, G and Ray, D (2011), ´Aspirations and Inequality´, Mimeo.
• Graham, B S and Temple, J (2006), “Rich nations, poor nations: how much can multiple equilibria explain?” Journal of Economic Growth, March 2006. 11(1), 5-41.
• Jalan, J and Ravallion, M (1998), ´Determinants of Transient and Chronic Poverty: Evidence from Rural China´, Policy Research Working Paper No 1936. World Bank.
• Knight, J and Gunatilaka, R (2008), ´Aspirations, Adaptation and Subjective Wellbeing of Rural-Urban Migrants in China´, Economics Series, Working Paper 381. University of Oxford. Department of Economics.
• Ray, D (2003), ´Aspirations, Poverty and Economic Change´, in Understanding Poverty, edited by Banerjee, A V, Benabou, R and Mookherjee, D Oxford: Oxford University Press.
• Selten, R (1998), “Aspiration Adaptation Theory.” Journal of Mathematical Psychology 42 (2-3), 191-214.
• Simon, H (1955), “A Behavioral Model of Rational Choice.” The Quarterly Journal of Economics 69, 1, 99-118.
• Wilson, W J (1987), The Truly Disadvantaged. Chicago: University of Chicago Press.