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

Mani, Anandi; Mullainathan, Sendhil; Shafir, Eldar; Zhao, Jiaying

doi:10.1086/709885

Cited by 47 publications

(62 citation statements)

References 23 publications

(20 reference statements)

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“…Second, the payday research design might not have captured well the financial shocks around payday. Reanalyzing the data, Mani et al (2020) show that insufficient control of the time of survey completion (before vs. after payday) seems to explain the non-results. Additionally, they found that executive control declined consistently as participants approached payday suggesting that facing financial scarcity causes cycles in executive control.…”

Section: Poverty Reduces Mental Bandwidth: Findings From Replication mentioning

confidence: 93%

“…Specifically, it is hard to isolate the effect of financial scarcity from that of other environmental and poverty-related causes. In designing field studies, researchers should consider the size and timing of the financial shock (Mani et al 2020). The before-after differences in income or wealth due to the financial shock must be large enough and should be distinguishable from other shocks in income or expenditure.…”

Section: Poverty Reduces Mental Bandwidth: Findings From Replication mentioning

confidence: 99%

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Poverty and economic decision making: a review of scarcity theory

Bruijn

Antonides

2021

Theory Decis

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Poverty is associated with a wide range of counterproductive economic behaviors. Scarcity theory proposes that poverty itself induces a scarcity mindset, which subsequently forces the poor into suboptimal decisions and behaviors. The purpose of our work is to provide an integrated, up-to-date, critical review of this theory. To this end, we reviewed the empirical evidence for three fundamental propositions: (1) Poverty leads to attentional focus and neglect causing overborrowing, (2) poverty induces trade-off thinking resulting in more consistent consumption decisions, and (3) poverty reduces mental bandwidth and subsequently increases time discounting and risk aversion. Our findings indicate that the current literature predominantly confirms the first and second proposition, although methodological issues prevent a firm conclusion. Evidence for the third proposition was not conclusive. Additionally, we evaluated the overall status of scarcity theory. Although the theory provides an original, coherent, and parsimonious explanation for the relationship between financial scarcity and economic decision making, the theory does not fully accord with the data and lacks some precision. We conclude that both theoretical and empirical work are needed to build a stronger theory.

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Section: Poverty Reduces Mental Bandwidth: Findings From Replication mentioning

confidence: 93%

Section: Poverty Reduces Mental Bandwidth: Findings From Replication mentioning

confidence: 99%

Poverty and economic decision making: a review of scarcity theory

Bruijn

Antonides

2021

Theory Decis

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“…Carvalho et al (2016) find no effect on cognitive functions between the two groups. Using the same data as Carvalho et al (2016), Mani et al (2020) show that the null result of Carvalho et al (2016) is sensitive to the specification. By including distance to payday, Mani et al (2020) show that the group interviewed before payday performed significantly worse in tests of cognitive functions.…”

Section: Related Literaturementioning

confidence: 97%

“…Using the same data as Carvalho et al (2016), Mani et al (2020) show that the null result of Carvalho et al (2016) is sensitive to the specification. By including distance to payday, Mani et al (2020) show that the group interviewed before payday performed significantly worse in tests of cognitive functions. Dalton et al (in press) investigate the effects of priming entrepreneurs with low income to think of financial problems.…”

Section: Related Literaturementioning

confidence: 97%

Poverty and limited attention

Schmitt

Schlatterer

2021

Economics & Human Biology

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In this article, we analyze whether the financial strain of poverty systematically alters the allocation of attention. We address two types of attention: attention to unexpectedly occurring events and attention to primary tasks that require focus. We show that the poor are significantly more likely than the rich to notice unexpected events. In addition, we find evidence that the poor notice unexpected events at the expense of attention to the primary task only if the task is sufficiently difficult.

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“…Furthermore, decision-makers in developing countries are likely to be low-level public sector functionaries who are poorly paid, live pay cheque to pay cheque and are preoccupied with financial and other worries. Scaling of any experiment as it becomes widely adopted is likely to exacerbate these information processing costs because of some of these ‘scarcity’-related issues faced by poorly paid bureaucratic functionaries (for a discussion, see Mani et al , 2020).…”

Section: Limited State Capacity and Scaling In Developing Countriesmentioning

confidence: 99%

Experimental evidence, scaling and public policy: a perspective from developing countries

Mani

2020

Behav. Public Policy

Self Cite

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I highlight two important factors particular to less-developed countries that can bias evidence generation and contribute to the ‘voltage drop’ in programme benefits, moving from field research experiments to policy implementation at scale. The first is the non-linear increase in information processing and coordination costs associated with upscaling in less-developed countries, given limited state capacity and rigid organizational hierarchies. The second is political bias in the choice of programmes considered for rigorous evaluation itself, resulting in distorted evidence and policy choice. These two factors raise considerations that complement the economics-based approach outlined by Al-Ubaydli et al. in the quest for more rigorous, evidence-based policy.

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

Cited by 47 publications

References 23 publications

Poverty and economic decision making: a review of scarcity theory

Poverty and economic decision making: a review of scarcity theory

Poverty and limited attention

Experimental evidence, scaling and public policy: a perspective from developing countries

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