The failure of foreign aid to promote growth in the developing world has received significant attention as evidence suggests that foreign aid does not translate into investment. This research has demonstrated that poor institutions in these developing economies (particularly with respect to...

This paper reports results from a unique two-stage experiment designed to examine the spillover effects of optimism and pessimism. In stage 1, we induce optimism or pessimism onto subjects by randomly assigning a high or low piece rate for performing a cognitive task. We find that participants...

We present a model of cognitive adaptation to examine the growth and behaviours of the underclass. In the model, individuals experiencing cognitive dissonance between status seeking and social recognition adapt their attitudes regarding what is deemed status worthy. This yields the endogenous...