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Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?

Author

Listed:
  • Mequanint B. Melesse

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT))

  • Amos Nyangira Tirra

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT))

  • Yabibal M. Walle

    (German Institute of Development and Sustainability (IDOS))

  • Michael Hauser

    (The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT)
    University of Natural Resources and Life Sciences)

Abstract

Aspirations have recently received increased attention in the analysis of poverty and its dynamics. The argument is that aspirations provide reference points for individuals’ forward-looking decisions and behaviours. Understanding of what determines aspirations is vitally important to design development interventions that can raise aspirations. In this paper, we analyse whether financial literacy is associated with individuals’ aspirations. Using data from more than 2000 Tanzanian households, we find a robust positive correlation between financial literacy and aspirations. Our results are robust to using alternative financial literacy measure, controlling for extensive covariates and non-cognitive traits, and sensitivity analyses to omitted variables. Overall, our findings suggest that aspirations could be influenced to improve poor individuals’ future investments and forward-looking behaviour.

Suggested Citation

  • Mequanint B. Melesse & Amos Nyangira Tirra & Yabibal M. Walle & Michael Hauser, 2023. "Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(6), pages 1294-1321, December.
    • Handle: RePEc:pal:eurjdr:v:35:y:2023:i:6:d:10.1057_s41287-023-00582-0
    DOI: 10.1057/s41287-023-00582-0
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    More about this item

    Keywords

    Aspiration; Financial literacy; Poverty; Non-cognitive trait; Tanzania;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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