The Psychology of Poverty: Where Do We Stand?

Johannes Haushofer and Daniel Salicath

No 31977, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In recent years, the psychological causes and consequences of poverty have received renewed attention from scientists and policymakers. In this review, we summarize new developments in this literature. First, we discuss advances in our understanding of the relationship between income and psychological well-being. There is a robust positive relationship between the two, both within and across countries, and in correlational and causal analyses. Second, we summarize recent work on the impact of “scarcity” and stress on economic preferences and decision-making. Our view of this literature is that the evidence is relatively weak. Third, we summarize evidence on the impact of psychological interventions on economic outcomes. Light-touch psychological interventions, such as videos that aim to raise aspirations, have shown some promise in encouraging investment and improving economic well-being. Similarly, psychotherapy and pharmacological mental health treatments have positive effects on economic outcomes. Relative to the effects of cash transfers, these impacts are small in absolute terms and large in per-dollar terms. We conclude by discussing whether a psychological poverty trap is plausible.

JEL-codes: D91 O12 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-cbe, nep-hea and nep-ltv
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Citations: View citations in EconPapers (2)

Published as Johannes Haushofer & Daniel Salicath, 2023. "THE PSYCHOLOGY OF POVERTY: WHERE DO WE STAND?," Social Philosophy and Policy, vol 40(1), pages 150-184.

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