Financial stress, cognition and vaccine use: Dual-processing and changes in risk preference

Richard Iles (), Thomas Marsh, Thumbi Mwangi () and Guy Palmer ()
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Richard Iles: Washington State University
Thumbi Mwangi: Washington State University
Guy Palmer: Washington State University

No 2019-4, Working Papers from School of Economic Sciences, Washington State University

Abstract: Decision-making in economics is largely framed by notions of risk preferences, consumption smoothing and stochastic changes in discounting. However, more recent empirical evidence indicates that direct measures of cognitive processes provide a more nuanced and predictively robust understanding of economic decision-making. The theoretical link between financial stress, changes in cognitive capacity and economic decision-making has become clearer due to the strong association between cognition and dual-processing theory. A need exists to better understand the potentially dynamic role of cognition on economic decision-making, particularly in low-income settings where poverty and associated financial stress are most prevalent. A short, unbalanced panel is used to estimate the effects of changing financial stress on household livestock expenditure in rural Kenya. Estimated negative changes in heuristic use on changes in livestock and educational expenditure provide further empirical evidence of the effect of changes in cognition on economic decision-making.

Keywords: Poverty; cognition; heuristics; livestock; Kenya (search for similar items in EconPapers)
JEL-codes: D91 I12 I32 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2019-06-12
New Economics Papers: this item is included in nep-cbe and nep-neu
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