Financial shame spirals: How shame intensifies financial hardship

Joe J. Gladstone, Jon M. Jachimowicz, Adam Greenberg and Adam D. Galinsky

Organizational Behavior and Human Decision Processes, 2021, vol. 167, issue C, 42-56

Abstract: Financial hardship is an established source of shame. This research explores whether shame is also a driver and exacerbator of financial hardship. Six experimental, archival, and correlational studies (N = 9,110)—including data from customer bank account histories and several longitudinal surveys that allow for participant fixed effects and identical twin comparisons—provide evidence for a vicious cycle between shame and financial hardship: Shame induces financial withdrawal, which increases the probability of counterproductive financial decisions that only deepen one’s financial hardship. Consistent with this model, shame was a stronger driver of financial hardship than the related emotion of guilt because shame increases withdrawal behaviors more than guilt. We also found that a theoretically motivated intervention—affirming acts of kindness—can break this cycle by reducing the link between financial shame and financial disengagement. This research suggests that shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship.

Keywords: Financial hardship; Financial decision-making; Emotions; Shame; Guilt (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jobhdp:v:167:y:2021:i:c:p:42-56

DOI: 10.1016/j.obhdp.2021.06.002

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