The Effect of Financial Scarcity on Decision Making among Low-paid Employees in Urban Ghana: Random Assignment before and after the Payday

Francis Adu Amankwa-Poku and Yoko Kijima ()
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Francis Adu Amankwa-Poku: Ministry of Finance, Accra, Ghana
Yoko Kijima: National Graduate Institute for Policy Studies, Tokyo, Japan

No 26-1, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: This study empirically examines whether periodic financial scarcity leads to fluctuations in cognitive function and mental health and subsequently affects optimal economic decision-making (risk aversion and present bias) among low-paid employees in an urban area in Ghana. We collected the data of the low-paid employees and randomly assigned them into two groups based on their next payday and timing of the interview: those who were interviewed just before their payday were financially more strained than those who were interviewed just after their payday. The estimation results support the theory of scarcity, showing that financial scarcity worsens cognitive function and mental health. However, we found no evidence that financial scarcity affects risk aversion and present bias as well as the quality of decision-making.

Keywords: Household decision making; cognitive function; present bias; risk aversion; mental health (search for similar items in EconPapers)
Pages: 50 pages
Date: 2026-04
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