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Higher economic inequality intensifies the financial hardship of people living in poverty by fraying the community buffer

Author

Listed:
  • Jon M. Jachimowicz

    (Harvard University)

  • Barnabas Szaszi

    (Eotvos Lorand University)

  • Marcel Lukas

    (Heriot-Watt University)

  • David Smerdon

    (University of Queensland, Lucia)

  • Jaideep Prabhu

    (University of Cambridge)

  • Elke U. Weber

    (Princeton University
    Princeton University
    Princeton University)

Abstract

The current research investigates whether higher economic inequality disproportionately intensifies the financial hardship of low-income individuals. We propose that higher economic inequality increases financial hardship for low-income individuals by reducing their ability to rely on their community as a buffer against financial difficulties. This may occur, in part, because a frayed community buffer reduces low-income individuals’ propensity to seek informal financial support from others. We provide empirical support across eight studies (sample size N = 1,029,900) from the United States, Australia and rural Uganda, through correlational and experimental data, as well as an instrumental variable analysis. On average across our studies, a 1 s.d. increase in economic inequality is associated with an increase of financial hardship among low-income individuals of 0.10 s.d. We discuss the implications of these results for policies aimed to help people living in poverty buffer against the adverse effects higher economic inequality imposes on them.

Suggested Citation

  • Jon M. Jachimowicz & Barnabas Szaszi & Marcel Lukas & David Smerdon & Jaideep Prabhu & Elke U. Weber, 2020. "Higher economic inequality intensifies the financial hardship of people living in poverty by fraying the community buffer," Nature Human Behaviour, Nature, vol. 4(7), pages 702-712, July.
    • Handle: RePEc:nat:nathum:v:4:y:2020:i:7:d:10.1038_s41562-020-0849-2
    DOI: 10.1038/s41562-020-0849-2
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    Cited by:

    1. Gladstone, Joe J. & Jachimowicz, Jon M. & Greenberg, Adam Eric & Galinsky, Adam D., 2021. "Financial shame spirals: How shame intensifies financial hardship," Organizational Behavior and Human Decision Processes, Elsevier, vol. 167(C), pages 42-56.
    2. David Brady & Michaela Curran & Richard Carpiano, 2023. "A test of the predictive validity of relative versus absolute income for self-reported health and well-being in the United States," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 48(26), pages 775-808.
    3. Clark Gordon L., 2022. "Agency, sentiment, and risk and uncertainty: fears of job loss in 8 European countries," ZFW – Advances in Economic Geography, De Gruyter, vol. 66(1), pages 3-17, May.
    4. Christian T. Elbæk & Panagiotis Mitkidis & Lene Aarøe & Tobias Otterbring, 2023. "Subjective socioeconomic status and income inequality are associated with self-reported morality across 67 countries," Nature Communications, Nature, vol. 14(1), pages 1-14, December.

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