Cognitive perspective on the self-reinforcing nature of poverty: Is subjective scarcity related to financial behaviour via the ability to think analytically?

Previous research suggests that the conditions of poverty can create cycles in which economic strain and certain financial behaviours reinforce each other over time. According to the scarcity theory, this pattern arises because scarcity depletes cognitive resources and narrows individuals’ attention to poverty-related concerns. The present study introduces a third, previously unexplored mechanism, positing that subjective scarcity indirectly affects financial behaviour by impairing analytic thinking. A representative sample of 712 participants completed a self-report survey, providing information about appraisal of their current financial situation (subjective scarcity), completing a test on analytic thinking, and responding to scales measuring financial management behaviour and impulsive self-gifting financial behaviour. Whilst the results offer limited support for the proposed mechanism, subjective scarcity was found to be directly associated with diminished analytic thinking and lower engagement in both financial management and self-gifting behaviour. These findings suggest that experiencing scarcity is not necessarily linked to impulsive financial behaviour that exacerbates financial strain, but rather to a lower tendency to pursue adaptive financial actions that might help relieve it.