Economics at your fingertips  

Poverty and economic decision making: a review of scarcity theory

Ernst-Jan Bruijn () and Gerrit Antonides
Additional contact information
Ernst-Jan Bruijn: Wageningen University
Gerrit Antonides: Wageningen University

Theory and Decision, 2022, vol. 92, issue 1, No 2, 5-37

Abstract: Abstract Poverty is associated with a wide range of counterproductive economic behaviors. Scarcity theory proposes that poverty itself induces a scarcity mindset, which subsequently forces the poor into suboptimal decisions and behaviors. The purpose of our work is to provide an integrated, up-to-date, critical review of this theory. To this end, we reviewed the empirical evidence for three fundamental propositions: (1) Poverty leads to attentional focus and neglect causing overborrowing, (2) poverty induces trade-off thinking resulting in more consistent consumption decisions, and (3) poverty reduces mental bandwidth and subsequently increases time discounting and risk aversion. Our findings indicate that the current literature predominantly confirms the first and second proposition, although methodological issues prevent a firm conclusion. Evidence for the third proposition was not conclusive. Additionally, we evaluated the overall status of scarcity theory. Although the theory provides an original, coherent, and parsimonious explanation for the relationship between financial scarcity and economic decision making, the theory does not fully accord with the data and lacks some precision. We conclude that both theoretical and empirical work are needed to build a stronger theory.

Keywords: Scarcity theory; Literature review; Poverty; Cognition; Attention; Economic decision making (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11238/PS2

DOI: 10.1007/s11238-021-09802-7

Access Statistics for this article

Theory and Decision is currently edited by Mohammed Abdellaoui

More articles in Theory and Decision from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2022-11-26
Handle: RePEc:kap:theord:v:92:y:2022:i:1:d:10.1007_s11238-021-09802-7