Dream Homes Aspirations and Real Estate Investments in Rural Myanmar - PowerPoint PPT Presentation

Dream Homes Aspirations and Real Estate Investments in Rural Myanmar Jeffrey R. Bloem Ph.D. Candidate Department of Applied Economics July 23, 2019 1 / 24

Duel Consequences of Fast Growth in a Poor Country “[A] period of fast growth in a poor country can put significant stress on the system which it must cope with. Growth can also unleash power aspirations as well as frustrations...” ◮ Ghatak et al. (2014)—quoted in Genicot and Ray (2017) ◮ Discussing economic inequality in India ◮ Many developing countries have fast-growing economies ... but also have increasingly economically unequal populations ◮ As discussed by Page and Pande (2018) 2 / 24

Duel Consequences of Fast Growth in a Poor Country “[A] period of fast growth in a poor country can put significant stress on the system which it must cope with. Growth can also unleash power aspirations as well as frustrations...” ◮ Ghatak et al. (2014)—quoted in Genicot and Ray (2017) ◮ Discussing economic inequality in India ◮ Many developing countries have fast-growing economies ... but also have increasingly economically unequal populations ◮ As discussed by Page and Pande (2018) 2 / 24

The Case of Myanmar ◮ In 2015, Myanmar was the fastest growing economy in the world ◮ Projected growth rate of 8.6 percent ◮ In 2016, elected first civilian President since 1962 ◮ Over 32 percent of the population live below the poverty line ◮ Roughly 17 million people 3 / 24

The Case of Myanmar ◮ In 2015, Myanmar was the fastest growing economy in the world ◮ Projected growth rate of 8.6 percent ◮ In 2016, elected first civilian President since 1962 ◮ Over 32 percent of the population live below the poverty line ◮ Roughly 17 million people 3 / 24

The Psychology of Economic Inequality ◮ Inequality is a classic literature in economics ◮ e.g., Becker and Tomes 1979; Loury 1982; Mookerjee and Ray 2003; Piketty 2014 ◮ A subset of this literature considers potential psychological constraints that may widen within-country economic inequality ◮ e.g., Ray 2006; Banerjee and Mullainathan 2010; Mookherjee et al. 2010; Bogliacino and Ortoleva 2013; Bernheim et al. 2015; Besley 2016; Dalton et al. 2016; Genicot and Ray 2017; Lybbert and Wydick 2018 ◮ Among these is a model of socially determined aspirations and incentives to invest in the future (Genicot and Ray 2017) ◮ Swift economic growth in a poor country can have competing consequences ◮ Inspire powerful aspirations and incentives for investment ◮ Lead to frustration and despair 4 / 24

The Psychology of Economic Inequality ◮ Inequality is a classic literature in economics ◮ e.g., Becker and Tomes 1979; Loury 1982; Mookerjee and Ray 2003; Piketty 2014 ◮ A subset of this literature considers potential psychological constraints that may widen within-country economic inequality ◮ e.g., Ray 2006; Banerjee and Mullainathan 2010; Mookherjee et al. 2010; Bogliacino and Ortoleva 2013; Bernheim et al. 2015; Besley 2016; Dalton et al. 2016; Genicot and Ray 2017; Lybbert and Wydick 2018 ◮ Among these is a model of socially determined aspirations and incentives to invest in the future (Genicot and Ray 2017) ◮ Swift economic growth in a poor country can have competing consequences ◮ Inspire powerful aspirations and incentives for investment ◮ Lead to frustration and despair 4 / 24

The Psychology of Economic Inequality ◮ Inequality is a classic literature in economics ◮ e.g., Becker and Tomes 1979; Loury 1982; Mookerjee and Ray 2003; Piketty 2014 ◮ A subset of this literature considers potential psychological constraints that may widen within-country economic inequality ◮ e.g., Ray 2006; Banerjee and Mullainathan 2010; Mookherjee et al. 2010; Bogliacino and Ortoleva 2013; Bernheim et al. 2015; Besley 2016; Dalton et al. 2016; Genicot and Ray 2017; Lybbert and Wydick 2018 ◮ Among these is a model of socially determined aspirations and incentives to invest in the future (Genicot and Ray 2017) ◮ Swift economic growth in a poor country can have competing consequences ◮ Inspire powerful aspirations and incentives for investment ◮ Lead to frustration and despair 4 / 24

The Aspirations Gap ◮ A core concept in Genicot and Ray (2017) is the aspirations gap ◮ The distance between an individual’s current and aspired standard of living ◮ “Too small” of a gap and there is little incentive to forgo present-day consumption to achieve an aspiration ◮ “Too large” of a gap and the necessary investment takes away too much present-day consumption ◮ Theoretical prediction: ◮ An inverted U-shaped relationship between the aspirations gap and investments 5 / 24

The Aspirations Gap ◮ A core concept in Genicot and Ray (2017) is the aspirations gap ◮ The distance between an individual’s current and aspired standard of living ◮ “Too small” of a gap and there is little incentive to forgo present-day consumption to achieve an aspiration ◮ “Too large” of a gap and the necessary investment takes away too much present-day consumption ◮ Theoretical prediction: ◮ An inverted U-shaped relationship between the aspirations gap and investments 5 / 24

Research Question ◮ General question ◮ Do psychological constraints limit investment in the future? ◮ Specific question ◮ Is there an inverted U-shaped relationship between the income aspirations gap and real estate investments in rural Myanmar? ◮ Result preview: Yes ◮ Robust to multiple estimation strategies ◮ OLS, semi-parametric, instrumental variable, coefficient stability tests Oster (2017) 6 / 24

Research Question ◮ General question ◮ Do psychological constraints limit investment in the future? ◮ Specific question ◮ Is there an inverted U-shaped relationship between the income aspirations gap and real estate investments in rural Myanmar? ◮ Result preview: Yes ◮ Robust to multiple estimation strategies ◮ OLS, semi-parametric, instrumental variable, coefficient stability tests Oster (2017) 6 / 24

Research Question ◮ General question ◮ Do psychological constraints limit investment in the future? ◮ Specific question ◮ Is there an inverted U-shaped relationship between the income aspirations gap and real estate investments in rural Myanmar? ◮ Result preview: Yes ◮ Robust to multiple estimation strategies ◮ OLS, semi-parametric, instrumental variable, coefficient stability tests Oster (2017) 6 / 24

Data Sources ◮ The data were collected in Mon State, Myanmar ◮ A coastal region with close proximity to Thailand ◮ Mon State Rural Household Survey (MSRHS) ◮ May and June 2015 ◮ 1,637 households within 143 enumeration areas ◮ Hope Survey (see Bloem et al. 2018) ◮ March 2016 ◮ 503 households within 48 enumeration areas (random subset of MSRHS) 7 / 24

Data Sources ◮ The data were collected in Mon State, Myanmar ◮ A coastal region with close proximity to Thailand ◮ Mon State Rural Household Survey (MSRHS) ◮ May and June 2015 ◮ 1,637 households within 143 enumeration areas ◮ Hope Survey (see Bloem et al. 2018) ◮ March 2016 ◮ 503 households within 48 enumeration areas (random subset of MSRHS) 7 / 24

Data Sources ◮ The data were collected in Mon State, Myanmar ◮ A coastal region with close proximity to Thailand ◮ Mon State Rural Household Survey (MSRHS) ◮ May and June 2015 ◮ 1,637 households within 143 enumeration areas ◮ Hope Survey (see Bloem et al. 2018) ◮ March 2016 ◮ 503 households within 48 enumeration areas (random subset of MSRHS) 7 / 24

Measuring Aspirations ◮ Follow the method used by Bernard and Taffesse (2014) ◮ “How much income do you currently earn each month?” ◮ “How much income would you like to earn each month?” ◮ Pre-testing raised concerns with this method ◮ Appearing hungry for excessive wealth is generally seen as being “un-Buddhist” ◮ Why answer any finite number to the aspirations question? ◮ We also asked the following question: ◮ “How much income do you need to feel financial secure?” 8 / 24

Measuring Aspirations ◮ Follow the method used by Bernard and Taffesse (2014) ◮ “How much income do you currently earn each month?” ◮ “How much income would you like to earn each month?” ◮ Pre-testing raised concerns with this method ◮ Appearing hungry for excessive wealth is generally seen as being “un-Buddhist” ◮ Why answer any finite number to the aspirations question? ◮ We also asked the following question: ◮ “How much income do you need to feel financial secure?” 8 / 24

Measuring Aspirations ◮ Follow the method used by Bernard and Taffesse (2014) ◮ “How much income do you currently earn each month?” ◮ “How much income would you like to earn each month?” ◮ Pre-testing raised concerns with this method ◮ Appearing hungry for excessive wealth is generally seen as being “un-Buddhist” ◮ Why answer any finite number to the aspirations question? ◮ We also asked the following question: ◮ “How much income do you need to feel financial secure?” 8 / 24

Constructing the Aspirations Gap ◮ Follow the method described by Janzen et al. (2017) Income aspirations gap i = aspiration i − current i (1) aspiration i ◮ Allows for meaningful comparisons of the aspirations gap across individuals ◮ A continuous measure bounded between 0 and 1 9 / 24