Poverty and Aspirations Failure: A Theoretical Framework

This paper introduces a formal model of internal constraints that derives the link between initial disadvantage with aspirations and choices. We show how the cognitive windows of individuals are endogenously determined and show how an individual’s cognitive neighbors impacts on internal constraints. Our analysis suggests that accounting for poverty traps requires an account of how the external disadvantage and internal constraints interact and provides a justi…cation for intervention programs that aim to shock aspirations directly and seek to empower participants. JEL Classi…cation: O10,O15,O12, D03. Keywords : Aspirations failure, persistent poverty, relative deprivation, self-con…dence, role models, cognitive neighbourhood, interacting thresholds. We would like to thank participants at the University of Bath seminar and Warwick workshop on Aspirations and Poverty for helpful comments. Special thanks to Jens Prufer and Vijayendra Rao for detailed comments. S. Ghosal and P. Dalton acknowledge support from ESRC-DFID grant RES-167-25-0364. P. Dalton also acknowledges …nancial support from a EST Marie Curie Fellowship, Royal Economic Society Junior Fellowship and Warwick Economics Department. Any remaining error is responsibility of the authors. e-mail: [email protected], [email protected], [email protected].