poverty on decision making Flashcards
Shah 2012
why do poor behave in ways that reinforces their poverty
- environmental factors = lack of education, bad health, working conditions
- psychological factors = personality
- behaviours and perspectives = resource scarcity affects the decisions they make - they make certain decisions that keep them poor
how does behaviour keep poor poor
- constantly thinking about tradeoffs
- expenditure has an immediate opportunity cost
- REQUIRES MORE COGNITIVE RESOURCES than being rich
- more calculations and decisions about decisions
- neglect less salient problems like investing in human capital for food issues
how does being poor affect decision making
- reduces willingness to take risks = more risk averse
- present biased = reduce willingness forgo current income in exchange for higher future income
- less likely to invest in technology, education
* poverty increases behaviours that makes it harder to escape poverty
Dohmen
- poor people have higher discount rates and more risk averse than rich people
- is this causal
- what is the direction
Carvalho 2016
- identifying causal effect of poverty
- testing if poor people exhibit higher present bias
- surveyes people before and after payday
- ## questions to do with present bias / risk aversion / cognitive function / expenditure
results of survey = do poor people exhibit present bias
- just before payday people spend less and have higher present bias for money
- liquidity constraint increases present bias
Haushofer and Fehr 2014
- does happiness make you rich
- does being rich make you happy
result Kenyan
correlation between happiness and income
- tranfers 0, 400, 1500 to poor Kenyan households
- measure happiness and stress levels after the transfer and compare to control = no transfer
- transfers = increase happiness and reduce stress
- experiment to test if stress causally affect risk and time preferences
- Cohn et al
- subjects engaged in risk taking tasks while receiving either painless or painful shock
- the anticipation of the pain induces fear
- results
- those where fear generated put less into the risky options compared to no fear (painless shocks)
- fear reduces risk taking
Induced cortisol results
- those injected with chronic cortisol are most risk averse compared to others
- placebo and acute cortisol
- more stress = less risk taking = more impatient
showing the clips
- show participants sad or neutral videos to induce emotional states
- people that watch the impatient video and more impatient than those that watch the neutral video
- more emotional = more impatient
classical econ thoughts on emotions
no link between emotional state and decision making
what is prosociality and why do we care
- prosociality = behaviour that benefits the society as a whole
- prosociality is an important aspect of social and economic outcomes
- like provision of goods, contract enforcement, growth
- individually = happyness education and earnings
- helping and sharing
how does prosociaity develop
childhood it develops
- children in developed countries from low income lack prosocial skills
- less trusting
does social environment and interventions affect prosociality development in kids
- environment: socioeconomic status SES, parent child interaction, parental prosocilaity
Kosse et al
Baloo and you mentoring scheme
- does exogenous enrichment of the social environment cause more trust and altruism in disavantaged children
- randomised controlled trials involving mentoring programme for low SES children
- used low and high Socioeconomic status families
- mentoring helps with social skills weekly
- interactive joint activities
- measuring social preferences:
altruism = 3 dictator games
trust = do i agree “i can trust “
interviewed mothers
