Edwin Fourrier-Nicolai*, Nicolas Destrée**

phd seminar

Edwin Fourrier-Nicolai*, Nicolas Destrée**

AMSE
The effect of aspirations on inequality*
Workers’ remittances and borrowing constraints in recipient countries**
Joint with
Michel Lubrano*
Venue

IBD Salle 16

Îlot Bernard du Bois - Salle 16

AMU - AMSE
5-9 boulevard Maurice Bourdet
13001 Marseille

Date(s)
Tuesday, March 27 2018| 12:30pm to 2:00pm
Contact(s)

Edward Levavasseur: edward.levavasseur[at]univ-amu.fr
Océane Piétri: oceane.pietri[at]univ-amu.fr
Morgan Raux: morgan.raux[at]univ-amu.fr

Abstract

*The self-detrimental behaviour of the poor has motivated economists to investigate theoretically the interplay between aspirations and inequality. Because aspirations are socially determined, household investment decisions tend to be reproduced according to the social context which fosters inequality to persist. We empirically examine the role of aspirations on inequality using a natural experiment. We exploit an exogenous variation of social aspirations determined by the exposure to West German TV broadcasts in East Germany before reunification. Only geography and topography were decisive in determining whether or not East German households could access West German TV broadcasts. We measure the effect of aspirations on income inequality by comparing inequality changes between the treatment and the control regions after reunification using Bayesian inference. Because the results may depend on the choice of an arbitrary measure of inequality, we use Lorenz-based inequality measures, namely Growth Incidence curves and Poverty Growth curves, which are closely linked to stochastic dominance.

**This paper focuses on the role played by remittances in constrained economies. We consider an overlapping generations economy in which households have access to International Capital Market and the possibility to borrow to finance children education in order to receive remittances. Following the literature, we assume that remittances relax borrowing constraints. These inflows may reduce or increase domestic savings and capital accumulation according to the level of capital inflows constraint. Because of the OLG structure, the country may either be constrained or unconstrained in the long run. Remittances may make the initially constrained economy converging to the unconstrained steady state. The model is calibrated for five countries.