Aspiration Adaptation in Resource-Constrained Environments

We use a multi-country field experiment to test the effect of a slum-housing intervention on the housing aspirations of non-beneficiary neighbors. Initially after treatment, nontreated households' aspirations to upgrade their dwelling are significantly higher compared to the treatment group, suggesting that they aspire to “keep-up” with their treatment Joneses'. No effects are found, however, on housing investments. Eight months later, the aspirational effect disappears. Estimates based on a structural model of aspiration adaptation show that the decay rate is 38% per month. Our evidence suggests that simply fostering higher aspirations may be insufficient to encourage forward-looking behavior among the poor