The financial and administrative burden of financially vulnerable households

Abstract

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. This chapter is based on: de Bruijn, E. & Antonides, G. (2020). Determinants of financial worry and rumination.

Everyday administrative burdens and inequality

“…Third, as we measure burdens “in daily life” and thus across many processes for each domain, processes within a domain may be classified as either “consumer” or “social” policy depending on the individual – for example, in the health domain, a UK citizen may interact with the public system or use private insurance. Lastly, accounting for a broad range of domains helps investigate distributive effects at scale, as accumulated burdens may be costlier for disadvantaged groups who are likely to face burdens from many different domains, as argued by de Bruijn (2021, 190).…”

Health in citizen‐state interactions: How physical and mental health problems shape experiences of administrative burden and reduce take‐up

“…Table 2 details the items that we used to measure experiences of burden in the two cases, which we adapted from De Bruijn (2021). Some items concern learning costs (tax items 1–4 and OK Promise item 4), some concern compliance costs (tax items 5–7 and OK Promise items 1 and 7), and some concern psychological costs (tax items 8–10 and OK Promise items 2, 3, and 5) (Moynihan, Herd, & Harvey, 2015).…”