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Economic Decision-making in Poverty Depletes Behavioral Control

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  • Dean Spears

    (Princeton University)

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    Abstract

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

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    File URL: http://www.princeton.edu/ceps/workingpapers/213spears.pdf
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    Bibliographic Info

    Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 1293.

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    Date of creation: Dec 2010
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    Handle: RePEc:pri:cepsud:213spears

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    Related research

    Keywords: impatient; impulsive behavior; poverty; psychology; cognative control;

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    1. Emre Ozdenoren & Stephen W. Salant & Dan Silverman, 2012. "Willpower And The Optimal Control Of Visceral Urges," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 342-368, 04.
    2. Daniel S. Hamermesh & Harley Frazis & Jay Stewart, 2005. "Data Watch: The American Time Use Survey," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 221-232, Winter.
    3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    4. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 635-672, May.
    5. Hamermesh, Daniel S., 2010. "Incentives, time use and BMI: The roles of eating, grazing and goods," Economics & Human Biology, Elsevier, vol. 8(1), pages 2-15, March.
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    Cited by:
    1. Zhang, Bei & Chu, Rong-Wei & Nie, Jun, 2014. "Wealth distribution with state-dependent risk aversion," Research Working Paper RWP 13-9, Federal Reserve Bank of Kansas City.

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