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Economic Decision-making in Poverty Depletes Behavioral Control

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  • Dean Spears

    (Princeton University)

Abstract

Economic theory and common sense suggest that time preference can cause or perpetuate poverty. Might poverty also or instead cause impatient or impulsive behavior? This paper reports a randomized lab experiment and a partially randomized field experiment, both in India, and analysis of the American Time Use Survey. In all three studies, poverty is associated with diminished behavioral control. The primary contribution is to isolate the direction of causality from poverty to behavior; three theoretical mechanisms from psychology cannot be definitively separated. One supported explanation is that poverty, by making economic decision-making more difficult for the poor, depletes cognitive control.

Suggested Citation

  • Dean Spears, 2010. "Economic Decision-making in Poverty Depletes Behavioral Control," Working Papers 1293, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:213
    as

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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/213spears.pdf
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    References listed on IDEAS

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    2. Uri Gneezy & Alex Imas, 2016. "Lab in the Field: Measuring Preferences in the Wild," CESifo Working Paper Series 5953, CESifo.
    3. Obayelu, Oluwakemi & Obayelu, Abiodun & Awoku, Ifeoluwase, 2021. "Technical efficiency and socioeconomic effects on poverty dynamics among cassava-based farming households in rural Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315376, International Association of Agricultural Economists.
    4. Andrés Moya & Michael Carter, 2014. "Violence and the Formation of Hopelessness and Pessimistic Prospects of Upward Mobility in Colombia," NBER Working Papers 20463, National Bureau of Economic Research, Inc.
    5. Rong-Wei Chu & Jun Nie & Bei Zhang, 2014. "Wealth distribution with state-dependent risk aversion," Research Working Paper RWP 13-9, Federal Reserve Bank of Kansas City.

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    More about this item

    Keywords

    impatient; impulsive behavior; poverty; psychology; cognative control;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other
    • J19 - Labor and Demographic Economics - - Demographic Economics - - - Other

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