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The effect of financial scarcity on discretionary spending, borrowing, and investing

Author

Listed:
  • Gülen Sarial‑Abi

    (Copenhagen Business School)

  • Aulona Ulqinaku

    (Leeds University Business School, University of Leeds)

  • Giampaolo Viglia

    (University of Portsmouth
    University of Aosta Valley)

  • Gopal Das

    (Indian Institute of Management Bangalore)

Abstract

Past research indicates that individuals with scarce resources focus on urgent needs. We hypothesize and find that individuals with scarce financial resources have greater discretionary expenditures such that they engage in more discretionary spending, borrowing, and investing. We demonstrate that one possible explanation for why those with scarce financial resources have greater discretionary expenditures is because they have more optimistic future perceptions. We support our predictions using a sample of over 60,000 observations from a survey in rural India, two archival datasets from surveys in Italy and Germany, and two preregistered online experiments. We control, test, and rule out different alternative explanations. The results of this research extend the findings in the financial scarcity and discretionary consumption literature. Additionally, we provide actionable guidelines for managers and public policy makers on how to nudge individuals with financial scarcity.

Suggested Citation

  • Gülen Sarial‑Abi & Aulona Ulqinaku & Giampaolo Viglia & Gopal Das, 2023. "The effect of financial scarcity on discretionary spending, borrowing, and investing," Journal of the Academy of Marketing Science, Springer, vol. 51(6), pages 1214-1243, November.
    • Handle: RePEc:spr:joamsc:v:51:y:2023:i:6:d:10.1007_s11747-021-00811-0
    DOI: 10.1007/s11747-021-00811-0
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