Poverty and Economic Decision-Making: Evidence from Changes in Financial Resources at Payday

Leandro Carvalho, Stephan Meier and Stephanie Wang

American Economic Review, 2016, vol. 106, issue 2, 260-84

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)

JEL-codes: C83 D14 D81 D91 I32 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20140481
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Citations: View citations in EconPapers (247)

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