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Impact of Psychological Consequences on Poverty: An Evidence from Pakistan

Author

Listed:
  • Humaira Mumtaz
  • Iqbal Javed
  • Allah Bakhsh

Abstract

The limitation and the complications which the economic agents are facing are studied in behavioral economics. The current study underhand is an attempt to explore the impact of psychological consequences on household incomes. The current study underhand used World Value Survey data for the years 2012-2014 for Pakistan. Simple Linear Regression analysis was used to measure the impact of psychological variables on the income of households in Pakistan. The results show that people with a more external locus of control positively affect their incomes, as they do believe in external factors like fate and luck for its success or failure. Creativity, loneliness, and positivity have a direct relation with income while mistrust and risk aversion have an inverse relation with income. Creative minds of individuals, freedom of choice to control their lives phenomenon have a strong, positive and significant association with income. Creativity at work increase income or regular work for just reward increase income. This means that the individuals who mistrust less are consequently quicker in taking economic decisions and would make investment planning that will lead to an increase in their income. A second estimated model of this study includes all socioeconomic variables which can determine the level of income. These variables cover a wide range of demographic and social variables. These socioeconomics variables are age, gender, level of education, number of children, marital status, interaction variable of marital status and age, a square of interaction variable of marital status and age, interaction variable of gender and age, a square of interaction variables of gender and age and dummies of the province. Results show that all these variables have a significant relation with income level. All the socioeconomic and demographic variables have a strong association with the level of income. It reveals that the dummy of marital status negatively influences the income, it means that an unmarried man can earn more than a married. This study suggested that policymakers should take initial steps to focus on human psychology while making efforts to reduce the poverty level.

Suggested Citation

  • Humaira Mumtaz & Iqbal Javed & Allah Bakhsh, 2019. "Impact of Psychological Consequences on Poverty: An Evidence from Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 1(3), pages 70-79.
    • Handle: RePEc:adx:journl:v:1:y:2019:i:3:p:70-79
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    Keywords

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    JEL classification:

    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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