IDEAS home Printed from https://ideas.repec.org/a/ucp/jacres/doi10.1086-709885.html
   My bibliography  Save this article

Scarcity and Cognitive Function around Payday: A Conceptual and Empirical Analysis

Author

Listed:
  • Anandi Mani
  • Sendhil Mullainathan
  • Eldar Shafir
  • Jiaying Zhao

Abstract

The ongoing demands around smoothing consumption with low and sporadic income flows in contexts of scarcity entail that minor changes in cash flows can have big psychological and behavioral effects. In this article, we examine the behavioral and cognitive impact of routine periodic fluctuations in financial status of the poor around paydays. In particular, we draw a link between a range of documented behaviors and an increase in scarcity-induced cognitive load, closer to payday. Our results, along with those of others briefly reviewed, illustrate the outsized role in scarcity contexts of otherwise trivial changes in income flows and highlight the importance of carefully structured research designs in studying the myriad challenges in scarcity contexts.

Suggested Citation

  • Anandi Mani & Sendhil Mullainathan & Eldar Shafir & Jiaying Zhao, 2020. "Scarcity and Cognitive Function around Payday: A Conceptual and Empirical Analysis," Journal of the Association for Consumer Research, University of Chicago Press, vol. 5(4), pages 365-376.
    • Handle: RePEc:ucp:jacres:doi:10.1086/709885
    DOI: 10.1086/709885
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/709885
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/709885
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/709885?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rebecca Hamilton & Debora Thompson & Sterling Bone & Lan Nguyen Chaplin & Vladas Griskevicius & Kelly Goldsmith & Ronald Hill & Deborah Roedder John & Chiraag Mittal & Thomas O’Guinn & Paul Piff & Car, 2019. "The effects of scarcity on consumer decision journeys," Journal of the Academy of Marketing Science, Springer, vol. 47(3), pages 532-550, May.
    2. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    3. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    4. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
    5. Qiyan Ong & Walter Theseira & Irene Y. H. Ng, 2019. "Reducing debt improves psychological functioning and changes decision-making in the poor," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(15), pages 7244-7249, April.
    6. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    7. Lisa A. Gennetian & Eldar Shafir, 2015. "The Persistence Of Poverty In The Context Of Financial Instability: A Behavioral Perspective," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(4), pages 904-936, September.
    8. Stephen Devereux, 2002. "Can Social Safety Nets Reduce Chronic Poverty?," Development Policy Review, Overseas Development Institute, vol. 20(5), pages 657-675, November.
    9. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-2390, October.
    10. Johannes Haushofer & Jeremy Shapiro, 2016. "The Short-term Impact of Unconditional Cash Transfers to the Poor: ExperimentalEvidence from Kenya," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1973-2042.
    11. Rebecca L. Thornton, 2008. "The Demand for, and Impact of, Learning HIV Status," American Economic Review, American Economic Association, vol. 98(5), pages 1829-1863, December.
    12. Leandro S. Carvalho & Stephan Meier & Stephanie W. Wang, 2016. "Poverty and Economic Decision-Making: Evidence from Changes in Financial Resources at Payday," American Economic Review, American Economic Association, vol. 106(2), pages 260-284, February.
    13. Brune, Lasse & Gine, Xavier & Goldberg, Jessica & Yang, Dean, 2011. "Commitments to save : a field experiment in rural Malawi," Policy Research Working Paper Series 5748, The World Bank.
    14. C. Fritz Foley, 2011. "Welfare Payments and Crime," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 97-112, February.
    15. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    16. Abhijit Banerjee & Esther Duflo & Rachel Glennerster, 2011. "Is Decentralized Iron Fortification a Feasible Option to Fight Anemia Among the Poorest?," NBER Chapters, in: Explorations in the Economics of Aging, pages 317-344, National Bureau of Economic Research, Inc.
    17. Michael Morris & Valerie A. Kelly & Ron J. Kopicki & Derek Byerlee, 2007. "Fertilizer Use in African Agriculture : Lessons Learned and Good Practice Guidelines," World Bank Publications - Books, The World Bank Group, number 6650, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eesha Sharma & Stephanie Tully & Xiang Wang, 2022. "Scarcity and Intertemporal Choice," Working Papers 22-27, Federal Reserve Bank of Philadelphia.
    2. Mika Akesaka & Peter Eibich & Chie Hanaoka & Hitoshi Shigeoka, 2023. "Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles," American Economic Journal: Applied Economics, American Economic Association, vol. 15(4), pages 68-99, October.
    3. Christina Kaliampakou & Lefkothea Papada & Dimitris Damigos, 2021. "Are Energy-Vulnerable Households More Prone to Informative, Market, and Behavioral Biases?," Societies, MDPI, vol. 11(4), pages 1-22, October.
    4. Schmitt, Stefanie Yvonne & Schlatterer, Markus G., 2020. "Poverty and limited attention," BERG Working Paper Series 159, Bamberg University, Bamberg Economic Research Group.
    5. Rachel Griffith, 2022. "Obesity, Poverty and Public Policy," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1235-1258.
    6. Ernst-Jan Bruijn & Gerrit Antonides, 2022. "Poverty and economic decision making: a review of scarcity theory," Theory and Decision, Springer, vol. 92(1), pages 5-37, February.
    7. Selina Bruns & Bernhard Dalheimer & Oliver Musshoff, 2022. "The effect of cognitive function on the poor's economic performance: Evidence from Cambodian smallholder farmers," Agricultural Economics, International Association of Agricultural Economists, vol. 53(3), pages 468-480, May.
    8. 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.
    9. Guilherme Lichand & Anandi Mani, 2020. "Cognitive Droughts," CSAE Working Paper Series 2020-02, Centre for the Study of African Economies, University of Oxford.
    10. Burlacu, Sergiu & Mani, Anandi & Ronzani, Piero & Savadori, Lucia, 2023. "The preoccupied parent," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 105(C).
    11. Timothée Demont & Daniela Horta Sáenz & Eva Raiber, 2023. "Turning worries into cognitive performance: Results from an online experiment during Covid," AMSE Working Papers 2302, Aix-Marseille School of Economics, France.
    12. Eva Raiber & Daniela Horta Saenz & Timothée Demont, 2023. "Turning worries into performance: Results from an online experiment during COVID," French Stata Users' Group Meetings 2023 08, Stata Users Group.
    13. Clémence Berson & Raphaël Lardeux & Claire Lelarge, 2021. "The Cognitive Load of Financing Constraints: Evidence from Large-Scale Wage Surveys," Working papers 836, Banque de France.
    14. Guilherme Lichand & Anandi Mani, 2020. "Cognitive droughts," ECON - Working Papers 341, Department of Economics - University of Zurich.
    15. Schmitt, Stefanie Y. & Schlatterer, Markus G., 2021. "Poverty and limited attention," Economics & Human Biology, Elsevier, vol. 41(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    2. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    3. Macchiavello, Rocco & Casaburi, Lorenzo, 2015. "Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry," CEPR Discussion Papers 10952, C.E.P.R. Discussion Papers.
    4. Markus Jäntti & Ravi Kanbur & Jukka Pirttilä, 2014. "Poverty, Development, and Behavioral Economics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 1-6, March.
    5. Girum Abebe & Biruk Tekle & Yukichi Mano, 2018. "Changing Saving and Investment Behaviour: The Impact of Financial Literacy Training and Reminders on Micro-businesses," Journal of African Economies, Centre for the Study of African Economies, vol. 27(5), pages 587-611.
    6. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2021. "How Debit Cards Enable the Poor to Save More," Journal of Finance, American Finance Association, vol. 76(4), pages 1913-1957, August.
    7. Claire Duquennois, 2022. "Fictional Money, Real Costs: Impacts of Financial Salience on Disadvantaged Students," American Economic Review, American Economic Association, vol. 112(3), pages 798-826, March.
    8. Friedman, Willa & Wilson, Nicholas, 2022. "Can nudging overcome procrastinating on preventive health investments?," Economics & Human Biology, Elsevier, vol. 45(C).
    9. Brune, Lasse & Kerwin, Jason T., 2019. "Income timing and liquidity constraints: Evidence from a randomized field experiment," Journal of Development Economics, Elsevier, vol. 138(C), pages 294-308.
    10. Carlos Chiapa & Silvia Prina, 2017. "Conditional Cash Transfers and Financial Access: Increasing the Bang for Each Transferred Buck?," Development Policy Review, Overseas Development Institute, vol. 35(1), pages 23-38, January.
    11. Dominik Naeher, 2022. "Technology Adoption Under Costly Information Processing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 699-753, May.
    12. Selina Bruns & Bernhard Dalheimer & Oliver Musshoff, 2022. "The effect of cognitive function on the poor's economic performance: Evidence from Cambodian smallholder farmers," Agricultural Economics, International Association of Agricultural Economists, vol. 53(3), pages 468-480, May.
    13. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2016. "Getting to the Top of Mind: How Reminders Increase Saving," Management Science, INFORMS, vol. 62(12), pages 3393-3411, December.
    14. Laureti, Carolina & Szafarz, Ariane, 2023. "Banking regulation and costless commitment contracts for time-inconsistent agents," Economic Modelling, Elsevier, vol. 129(C).
    15. Bonan, Jacopo & Battiston, Pietro & Bleck, Jaimie & LeMay-Boucher, Philippe & Pareglio, Stefano & Sarr, Bassirou & Tavoni, Massimo, 2021. "Social interaction and technology adoption: Experimental evidence from improved cookstoves in Mali," World Development, Elsevier, vol. 144(C).
    16. Lorenzo Casaburi & Rocco Macchiavello, 2019. "Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya," American Economic Review, American Economic Association, vol. 109(2), pages 523-555, February.
    17. Haoye Sun & Thorsten Teichert, 2024. "Scarcity in today´s consumer markets: scoping the research landscape by author keywords," Management Review Quarterly, Springer, vol. 74(1), pages 93-120, February.
    18. Kondylis, Florence & Mueller, Valerie & Zhu, Jessica, 2017. "Seeing is believing? Evidence from an extension network experiment," Journal of Development Economics, Elsevier, vol. 125(C), pages 1-20.
    19. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    20. Hilbert, Leon P. & Noordewier, Marret K. & van Dijk, Wilco W., 2022. "Financial scarcity increases discounting of gains and losses: Experimental evidence from a household task," Journal of Economic Psychology, Elsevier, vol. 92(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jacres:doi:10.1086/709885. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JACR .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.