Poverty and Economic Decision-Making: Evidence from Changes in Financial Resources at Payday
Leandro S. Carvalho, Stephan Meier, Stephanie W. Wang
American Economic Review · 2016 · Volume 106 · Issue 2
Abstract
We study the effect of financial resources on decision-making. Low-income US households are randomly assigned to receive an online survey before or after payday. The survey collects measures of cognitive function and administers risk and intertemporal choice tasks. The study design generates variation in cash, checking and savings balances, and expenditures. Before-payday participants behave as if they are more present-biased when making intertemporal choices about monetary rewards but not when making intertemporal choices about nonmonetary real-effort tasks. Nor do we find before-after differences in risk-taking, the quality of decision-making, the performance in cognitive function tasks, or in heuristic judgments. (JEL C83, D14, D81, D91, I32)
Keywords
Survey Methods, Sampling Methods, Household Saving, Personal Finance, Criteria for Decision-Making under Risk and Uncertainty, Intertemporal Household Choice, Life Cycle Models and Saving, Measurement and Analysis of Poverty
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