Aspirations and investments in rural Myanmar

The aspirations gap is the distance between an individual's current and aspired standard of livelihood. A growing theoretical literature predicts that aspirations both too close and too far away from current standards lead to less investment in the future. These theories imply an inverted U-shaped relationship between the aspirations gap and investments. I test this hypothesis and extend existing empirical findings to rural Myanmar by examining the relationship between the income aspirations gap and real estate investment choices. I find that income aspirations that are ahead, but not too far ahead, of current income levels provide the best incentive for investment. Analysis of heterogeneity highlights that this relationship is strongest for those with relatively low income and those who hold fatalistic beliefs. These findings suggest the presence of psychological constraints to poverty alleviation and development in rural Myanmar.

Automated summary

The aspirations gap refers to the discrepancy between an individual's current and desired standard of living, with short-term income aspirations showing an inverted U-shaped relationship with investment. For rural residents in Myanmar, slightly higher income aspirations than current income levels provide the best incentive for investment, particularly for those with lower income and fatalistic beliefs.