Worries of the poor: The impact of financial burden on the risk attitudes of micro-entrepreneurs

Dalton, Patricio; Nhung, Nguyễn Thị Hồng; Rüschenpöhler, Julius

doi:10.1016/j.joep.2019.102198

Cited by 39 publications

(49 citation statements)

References 52 publications

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“…Two studies examined the effect of poverty on cognitive capacity (fluid intelligence). First, as part of a study examining the impact of financial worries on risk-aversion, Dalton et al (2019) also investigated the effect on fluid intelligence. To this end, they conducted a lab-in-thefield experiment among low-income small retailers in Vietnam.…”

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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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: 99%

Poverty and economic decision making: a review of scarcity theory

Bruijn

Antonides

2021

Theory Decis

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“…Haushofer and Fehr [19], based on a review of the literature, conclude that stress and affect are likely channels through which poverty effects individuals' risk preferences and time-discounting. More recent evidence further supports the existence of this likely casual pathway [20,21]. Another aspect of economic behavior likely affected by poverty is cognitive capacity.…”

Section: Introductionmentioning

confidence: 88%

“…The seminal paper by Mani and colleagues [ 4 ] uses RPM to measure fluid intelligence, numerical Stroop task, and spatial compatibility task to measure the speed and accuracy of response. Several other economic studies also use RPM in Vietnam (middle income country) and the US and UK (high income countries) [ 20 , 32 , 33 ]. In contrast, working memory capacity (WMC) is a distinct construct frequently used in psychology to measure respondents’ ability to recall information in the face of distracting information [ 34 – 36 ].…”

Section: Introductionmentioning

confidence: 99%

“…Participants in this study were predominantly below the national rural poverty line. A study conducted in Vietnam among small business owners found that changes in risk preferences may be due to negative income shocks [ 20 ]. In the study by Dalton et al, small business retailers were presented with a series of hypothetical financial scenarios [ 20 ].…”

Section: Introductionmentioning

confidence: 99%

“…A study conducted in Vietnam among small business owners found that changes in risk preferences may be due to negative income shocks [ 20 ]. In the study by Dalton et al, small business retailers were presented with a series of hypothetical financial scenarios [ 20 ]. Retailers were randomly assigned into treatment (hard scenarios) and control groups (easy scenarios).…”

Section: Introductionmentioning

confidence: 99%

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The role of short-term changes in cognitive capacity on economic expenditure among Kenyan agro-pastoralists

Iles

Surve

Kagundu³

et al. 2021

PLoS ONE

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The increased exposure of pastoralist communities in East Africa to climatic shocks has focused attention on the resilience of these communities. Although many social scientists directly or indirectly infer versions of homo-economic agents, increasing evidence in development behavioral economics, indicates that such assumptions may be misplaced. Despite on-going advances in the science concerning the effects of stress on dynamic changes in short-term cognitive capacity, there remains limited understanding of the effects of changes in cognitive capacity on economic decision making. The present research empirically evaluates the drivers of short-term changes in cognitive capacity–cognitive ability and heuristic use–and its effect on crop and livestock expenditure among predominantly poor Kenyan agro-pastoralists. Three rounds of cognition and survey data from Samburu, Kenya is analysed. The primary data was collected at the end of the 2015–16 East African drought and covers an 11-month period between October 2016 and September 2017. Dynamic panel estimation, employing maximum likelihood, is used on balanced and unbalanced data. Results indicate that fluid intelligence and heuristic use, along with literacy and stressors, affect crop expenditure. Perceptions of scarcity, relative to prior expectations, are also identified as an important determinant of short-term changes in cognitive ability. These results underscore the importance of better understanding the effects of short-term changes in cognitive capacity on economic expenditure among the poor.

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Personality trait differences across types of entrepreneurs: a systematic literature review

Salmony

Kanbach

2021

Rev Manag Sci

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The personality traits that define entrepreneurs have been of significant interest to academic research for several decades. However, previous studies have used vastly different definitions of the term “entrepreneur”, meaning their subjects have ranged from rural farmers to tech-industry start-up founders. Consequently, most research has investigated disparate sub-types of entrepreneurs, which may not allow for inferences to be made regarding the general entrepreneurial population. Despite this, studies have frequently extrapolated results from narrow sub-types to entrepreneurs in general. This variation in entrepreneur samples reduces the comparability of empirical studies and calls into question the reviews that pool results without systematic differentiation between sub-types. The present study offers a novel account by differentiating between the definitions of “entrepreneur” used in studies on entrepreneurs’ personality traits. We conduct a systematic literature review across 95 studies from 1985 to 2020. We uncover three main themes across the previous studies. First, previous research applied a wide range of definitions of the term “entrepreneur”. Second, we identify several inconsistent findings across studies, which may at least partially be due to the use of heterogeneous entrepreneur samples. Third, the few studies that distinguished between various types of entrepreneurs revealed differences between them. Our systematic differentiation between entrepreneur sub-types and our research integration offer a novel perspective that has, to date, been widely neglected in academic research. Future research should use clearly defined entrepreneurial samples and conduct more systematic investigations into the differences between entrepreneur sub-types.

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Worries of the poor: The impact of financial burden on the risk attitudes of micro-entrepreneurs

Cited by 39 publications

References 52 publications

Poverty and economic decision making: a review of scarcity theory

Poverty and economic decision making: a review of scarcity theory

The role of short-term changes in cognitive capacity on economic expenditure among Kenyan agro-pastoralists

Personality trait differences across types of entrepreneurs: a systematic literature review

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