Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles

Mike Akesaka (), Peter Eibich, Chie Hanaoka and Hitoshi Shigeoka
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Mike Akesaka: Osaka University

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: The poor live paycheck to paycheck and are repeatedly exposed to strong cyclical income fluctuations. We investigate whether such income fluctuations affect risk preference among the poor. If risk preference temporarily changes around payday, optimal decisions made before payday may no longer be optimal afterward, which could reinforce poverty. By exploiting Social Security payday cycles in the US, we find that risk preference among the poor relying heavily on Social Security changes around payday. Rather than cognitive decline before payday, the deterioration of mental health and relative deprivation may play a role. We find similar evidence among the Japanese elderly.

Keywords: poverty; risk preference; Social Security; mental health; relative deprivation; elderly; Health and Retirement Survey; Japanese Study of Aging and Retirement (search for similar items in EconPapers)
JEL-codes: D81 D91 I32 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-age, nep-hea and nep-ias
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles (2023)
Working Paper: Temporal Instability of Risk Preference Among the Poor: Evidence from Payday Cycles (2023)
Working Paper: Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles (2021)
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