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Financial stress, cognition and vaccine use: Dual-processing and changes in risk preference

Author

Listed:
  • Iles, Richard

    (Washington State University)

  • Marsh, Thomas

    (Washington State University)

  • Mwangi, Thumbi

    (Washington State University)

  • Palmer, Guy

    (Washington State University)

Abstract

Decision-making in economics is largely framed by notions of risk preferences, consumption smoothing and stochastic changes in discounting. However, more recent empirical evidence indicates that direct measures of cognitive processes provide a more nuanced and predictively robust understanding of economic decision-making. The theoretical link between financial stress, changes in cognitive capacity and economic decision-making has become clearer due to the strong association between cognition and dual-processing theory. A need exists to better understand the potentially dynamic role of cognition on economic decision-making, particularly in low-income settings where poverty and associated financial stress are most prevalent. A short, unbalanced panel is used to estimate the effects of changing financial stress on household livestock expenditure in rural Kenya. Estimated negative changes in heuristic use on changes in livestock and educational expenditure provide further empirical evidence of the effect of changes in cognition on economic decision-making.

Suggested Citation

  • Iles, Richard & Marsh, Thomas & Mwangi, Thumbi & Palmer, Guy, 2019. "Financial stress, cognition and vaccine use: Dual-processing and changes in risk preference," Working Papers 2019-4, School of Economic Sciences, Washington State University.
    • Handle: RePEc:ris:wsuwpa:2019_004
    Note: http://ses.wsu.edu/wp-content/uploads/2019/06/WP2019-4.pdf
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    References listed on IDEAS

    as
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    3. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
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    6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Poverty; cognition; heuristics; livestock; Kenya;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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