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The Persistence Of Poverty In The Context Of Financial Instability: A Behavioral Perspective

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  • Lisa A. Gennetian
  • Eldar Shafir

Abstract

We review recent findings regarding the psychology of decisionmaking in contexts of poverty, and consider their application to public policy. Of particular interest are the oft‐neglected psychological and behavioral consequences of economic scarcity coupled with financial instability. The novel framework highlights the psychological costs of low and unstable incomes, and how these can transform small and momentary financial hurdles into long‐lasting poverty traps. Financial instability, we suggest, not only has obvious economic ramifications for well‐being, but it also creates the need for constant focus and attention, and can distract from the very opportunities otherwise designed to alleviate the effects of poverty. We describe a variety of public policy strategies that emerge from this perspective that are not readily apparent in conventional theories that permeate the design of social programs.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:jpamgt:v:34:y:2015:i:4:p:904-936
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    File URL: http://hdl.handle.net/10.1002/pam.21854
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    Cited by:

    1. Cameron, Anna & Tedds, Lindsay M., 2021. "Gender-Based Violence, Economic Security, and the Potential of Basic Income: A Discussion Paper," MPRA Paper 107478, University Library of Munich, Germany.
    2. 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).
    3. Lenz, Anna-Katharina & Sutter, Christopher & Goldszmidt, Rafael & Zucco, Cesar, 2021. "Venture distress and problemistic search among entrepreneurs in Brazilian favelas," Journal of Business Venturing, Elsevier, vol. 36(6).
    4. List, John A. & Samek, Anya & Suskind, Dana L., 2018. "Combining behavioral economics and field experiments to reimagine early childhood education," Behavioural Public Policy, Cambridge University Press, vol. 2(1), pages 1-21, May.
    5. 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.
    6. Karen Z. Kramer & Flávia Cristina Drumond Andrade & Andrew J. Greenlee & Ruby Mendenhall & Dylan Bellisle & Renee Lemons Blanks, 2019. "Periodic Earned Income Tax Credit (EITC) Payment, Financial Stress and Wellbeing: A Longitudinal Study," Journal of Family and Economic Issues, Springer, vol. 40(3), pages 511-523, September.
    7. 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.
    8. Morrissey, Taryn W. & Cha, Yun & Wolf, Sharon & Khan, Mariam, 2020. "Household economic instability: Constructs, measurement, and implications," Children and Youth Services Review, Elsevier, vol. 118(C).
    9. Elizabeth W. Cavadel & Jacqueline F. Kauff & Mary Anne Anderson & Sheena McConnell & Michelle Derr, "undated". "Self-Regulation and Goal Attainment: A New Perspective for Employment Programs," Mathematica Policy Research Reports e49aff23628f45bd847fd2e86, Mathematica Policy Research.
    10. Tedds, Lindsay M. & Crisan, I. Daria & Petit, Gillian, 2020. "Basic Income in Canada: Principles and Design Features," MPRA Paper 105911, University Library of Munich, Germany.
    11. Mateo-Berganza Díaz, María Mercedes & Becerra, Laura & Hernández Agramonte, Juan Manuel & Lopez Boo, Florencia & Pérez Alfaro, Marcelo & Vasquez Echeverria, Alejandro, 2020. "Nudging Parents to Increase Preschool Attendance in Uruguay," IDB Publications (Working Papers) 10893, Inter-American Development Bank.
    12. Mira Bierbaum & Eleonora E M Nillesen, 2021. "Sustaining the integrity of the threatened self: A cluster-randomised trial among social assistance applicants in the Netherlands," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-21, June.
    13. Susan E. Mayer & Ariel Kalil & Philip Oreopoulos & Sebastian Gallegos, 2015. "Using Behavioral Insights to Increase Parental Engagement: The Parents and Children Together (PACT) Intervention," NBER Working Papers 21602, National Bureau of Economic Research, Inc.
    14. Aparna Soni & Taryn Morrissey, 2022. "The effects of Medicaid expansion on home production and childcare," Southern Economic Journal, John Wiley & Sons, vol. 88(3), pages 931-950, January.
    15. Lisa A. Gennetian & Greg Duncan & Nathan A. Fox & Katherine Magnuson & Sarah Halpern-Meekin & Kimberly G. Noble & Hirokazu Yoshikawa, 2022. "Unconditional Cash and Family Investments in Infants: Evidence from a Large-Scale Cash Transfer Experiment in the U.S," NBER Working Papers 30379, National Bureau of Economic Research, Inc.
    16. Liwei Zhang & Wen-Jui Han, 2017. "Poverty Dynamics and Academic Trajectories of Children of Immigrants," IJERPH, MDPI, vol. 14(9), pages 1-31, September.
    17. Dahan, Momi & Sayag, Doron, 2024. "Scarcity and consumption priorities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    18. Petit, Gillian & Tedds, Lindsay M., 2020. "Income Assistance in British Columbia: Reforms Along Basic Income Lines," MPRA Paper 105933, University Library of Munich, Germany.
    19. David A. Zalewski, 2019. "Uncertainty and the Economy of Exclusion: Insights from Post‐Keynesian Institutionalism," American Journal of Economics and Sociology, Wiley Blackwell, vol. 78(4), pages 955-972, September.
    20. Monahan, Emma Kahle, 2020. "Income instability and child maltreatment: Exploring associations and mechanisms," Children and Youth Services Review, Elsevier, vol. 108(C).
    21. D. Pennesi, 2016. "Deciding fast and slow," Working Papers wp1082, Dipartimento Scienze Economiche, Universita' di Bologna.
    22. Momi Dahan & Udi Nisan, 2020. "Late Payments, Liquidity Constraints and the Mismatch between Due Dates and Paydays," CESifo Working Paper Series 8733, CESifo.

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