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The prospective associations between financial scarcity and financial avoidance

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  • Hilbert, Leon P.
  • Noordewier, Marret K.
  • van Dijk, Wilco W.

Abstract

The current study investigated the prospective associations between financial scarcity and financial avoidance. We hypothesized that over time, financial scarcity––the experience of lacking needed financial resources––is associated with an increase in financial avoidance––the tendency to avoid dealing with one’s finances––, and vice versa. In a longitudinal panel study, including a large and representative adult sample of Dutch citizens (initial N = 1,122, final N = 837), we measured financial scarcity and financial avoidance twice over a period of 22 months. Data were analyzed using a cross-lagged panel model, which allows to test for prospective effects of one variable on the other, while controlling for autoregressive effects. Confirming our preregistered hypotheses, results showed that financial scarcity was positively related with an increase in subsequent financial avoidance, whereas financial avoidance was positively related with an increase in subsequent financial scarcity. While these longitudinal findings are not causal, they are in line with the concept of a poverty trap, where financial scarcity and financial avoidance form a temporally dynamic and increasing relationship.

Suggested Citation

  • Hilbert, Leon P. & Noordewier, Marret K. & van Dijk, Wilco W., 2022. "The prospective associations between financial scarcity and financial avoidance," Journal of Economic Psychology, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:joepsy:v:88:y:2022:i:c:s0167487021000891
    DOI: 10.1016/j.joep.2021.102459
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    1. Gladstone, Joe J. & Jachimowicz, Jon M. & Greenberg, Adam Eric & Galinsky, Adam D., 2021. "Financial shame spirals: How shame intensifies financial hardship," Organizational Behavior and Human Decision Processes, Elsevier, vol. 167(C), pages 42-56.
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    Cited by:

    1. Simonse, Olaf & Van Dijk, Wilco W. & Van Dillen, Lotte F. & Van Dijk, Eric, 2024. "Economic predictors of the subjective experience of financial stress," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Block, Joern & Kritikos, Alexander S. & Priem, Maximilian & Stiel, Caroline, 2022. "Emergency-aid for self-employed in the Covid-19 pandemic: A flash in the pan?," Journal of Economic Psychology, Elsevier, vol. 93(C).
    3. Hilbert, Leon P. & Noordewier, Marret K. & van Dijk, Wilco W., 2022. "Financial scarcity increases discounting of gains and losses: Experimental evidence from a household task," Journal of Economic Psychology, Elsevier, vol. 92(C).
    4. Ruggeri, Kai & Abate Romero Landini, Giampaolo & Busch, Katharina & Cafarelli, Valentina & Doubravová, Barbora & Gurol, Deniz Misra & Miralem, Melika & Nilsson, Fredrik & Ashcroft-Jones, Sarah & Stock, 2024. "Financial decision-making, income, cognitive biases: The impact of economic systems and environments on behavior in six countries," OSF Preprints f8hyk, Center for Open Science.
    5. van Dijk, Wilco W. & van der Werf, Minou M.B. & van Dillen, Lotte F., 2022. "The Psychological Inventory of Financial Scarcity (PIFS): A psychometric evaluation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    6. de Almeida, Filipa & Scott, Ian J. & Soro, Jerônimo C. & Fernandes, Daniel & Amaral, André R. & Catarino, Mafalda L. & Arêde, André & Ferreira, Mário B., 2024. "Financial scarcity and cognitive performance: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 101(C).
    7. Kristoffersen, Ingebjørg & Hoang, Dan & Li, Ian W., 2024. "Understanding the mental health-based poverty trap: Dynamics in psychological distress and financial precariousness, and the role of self-efficacy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 111(C).
    8. Ariel Kalil & Susan Mayer & Rohen Shah, 2023. "Scarcity and Inattention," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 7(1), pages 35-42, November.
    9. El Halabi, Malak & Chan, Wing Yan Florence & Tunca, Burak & Ziano, Ignazio & Feldman, Gilad, 2022. "Replication: Unsuccessful replications and extensions of Temporal Value Asymmetry in monetary valuation and moral judgment," Journal of Economic Psychology, Elsevier, vol. 90(C).
    10. Fred van Raaij, W. & Riitsalu, Leonore & Põder, Kaire, 2023. "Direct and indirect effects of self-control and future time perspective on financial well-being," Journal of Economic Psychology, Elsevier, vol. 99(C).

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