Cognitive droughts
Open accessAbstract
Poverty involves both low income levels and high income uncertainty. Do both these dimensions of being poor capture attention in ways that distort decision-making and trap people in poverty? We examine these issues using real-life shocks faced by farmers in Brazil: random payday variation affecting income levels, and rainfall shocks that affect income uncertainty. We find that it is income uncertainty that systematically has adverse cognitive effects; low income levels affect only the poorest households. The net adverse impacts on cognitive function prevail even though both dimensions of poverty reallocate attention to scarce-resource tasks. These results broaden our understanding of the impacts of uncertainty by exploring a psychological channel distinct from risk aversion, and help reconcile apparently contradictory evidence on the cognitive impact of poverty in previous studies.
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Induced scarcity-related worries led to tunneling.
“Similar to the field study, they found that induced scarcity-related worries led to tunneling.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
The validity of the tunneling measures in Lichand and Mani (2020) is questionable because tunneling was not directly observed and effects on individual measures differed and some pointed in the opposite direction.
“This questions the validity of the tunneling measures.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
Participants were more likely to tunnel in the period before payday than after payday, with larger effect sizes closer to payday.
“They found that participants were more likely to tunnel in the period before payday than after payday. More specifically, the effect sizes were larger closer to payday.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
Both a low level of income and greater uncertainty in income induce tunneling.
“Overall, the authors conclude that both a low level of income and greater uncertainty in income induces tunneling.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
In a field study among Brazilian farmers, participants exposed to less rainfall were more likely to tunnel than participants facing more rainfall.
“They found that participants exposed to less rainfall were more likely to tunnel (i.e., scarcity-related demands captured their attentional resources) than participants facing more rainfall.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
The field study of Lichand and Mani (2020) provides some evidence for differential effects of income level and income uncertainty on attention allocation, although the study has methodological issues.
“As discussed above, the field study of Lichand and Mani (2020) provides some evidence for differential effects of income level and income uncertainty on attention allocation, although the study comes with some methodological issues.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Lichand and Mani (2020) did not find differences in sensitivity to the anchoring effect before versus after payday.
“In line with this finding, Lichand and Mani (2020) did not find differences in sensitivity to the anchoring effect before versus after payday.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Lichand and Mani (2020) found that Brazilian farmers were less susceptible to the relativity bias before than after payday.
“Similarly, Lichand and Mani (2020) found that Brazilian farmers were less susceptible to the relativity bias before than after payday.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Payday research designs did not capture financial uncertainty, which might primarily drive the adverse effect of poverty on cognitive control.
“Furthermore, these payday research designs did not capture financial uncertainty, which might primarily drive the adverse effect of poverty on cognitive control (Lichand and Mani 2020).”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
The drop in cognitive performance in Lichand and Mani (2020) was equivalent to the gap between higher and lower educated farmers and was largest for low-income farmers.
“This drop in cognitive performance was equivalent to the gap between higher and lower educated farmers and was largest for low-income farmers.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Variation in payday did not affect executive function, except for farmers in the poorest regions.
“However, variation in payday did not affect executive function, except for farmers in the poorest regions.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Lichand and Mani (2020) found that farmers exposed to less rainfall worried more about rainfall and performed worse on cognitive control than farmers exposed to more rainfall.
“Farmers exposed to less rainfall worried more about rainfall and performed worse on cognitive control than farmers exposed to more rainfall.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
The effect of poverty on cognitive control was not found in studies exploiting monthly payday or loan disbursement, possibly because these financial shocks are too small to affect cognitive control meaningfully.
“Specifically, the effect was not found in studies exploiting (monthly) payday (Carvalho et al. 2016; Lichand and Mani 2020) or loan disbursement (Fehr et al. 2019), possibly because these financial shocks are too small to affect cognitive control meaningfully.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani 2020
Income uncertainty (facing a lack of rainfall) dominates temporary liquidity constraints (around payday) as the main driver of the mental bandwidth tax caused by poverty.
“Additionally, the results suggest that income uncertainty (facing a lack of rainfall) dominates temporary liquidity constraints (around payday) as the main driver of the mental bandwidth tax caused by poverty.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Experimental induction of drought-related worries provided similar results to the rainfall variation in Lichand and Mani (2020).
“Furthermore, experimental induction of drought-related worries provided similar results.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
The minds of farmers facing less rainfall were loaded with thoughts about droughts and related financial uncertainty, leaving less bandwidth for other activities.
“These results suggest that the minds of farmers facing less rainfall were loaded with thoughts about droughts and related financial uncertainty leaving less bandwidth for other activities.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Farmers exposed to less rainfall or drought-related worries performed worse on executive function tasks than farmers exposed to more rainfall or control condition.
“Farmers exposed to less rainfall/drought- related worries performed worse on executive function tasks than farmers exposed to more rainfall/control condition.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Variation in payday (before vs. after) did not affect executive function (except for the poorest).
“Variation in payday (before vs. after) did not affect executive function (except for the poorest)”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Farmers facing lower rainfall rates or induced with drought-related worries were more likely to tunnel than farmers facing higher rainfall rates or in the control condition.
“Farmers facing lower rainfall rates/induced with drought- related worries were more likely to tunnel than farmers facing higher rainfall rates/ in the control condition.”
From Poverty and economic decision making: a review of scarcity theory (2022) · cites this paper as Lichand and Mani (2020)
Cited by
Sorted by citations
Poverty and economic decision making: a review of scarcity theory
de Bruijn, E.-J., & Antonides, G. (2022) · Theory and Decision · doi:10.1007/s11238-021-09802-7 · Cited by 277 · see citing works
- Authors
- Lichand, G., & Mani, A.
- ORCID
- Lichand, Guilherme
- Venue
- University of Zurich
- Publisher
- University of Zurich
- Published
- 2020-02
- OpenAlex
- W6948450082
- Cited by
- 4
- References
- 0
- Citations by year
- 2024: 1 · 2022: 1 · 2021: 2
- Type
- report
- Language
- en
- Open access
- green
- www.zora.uzh.ch
- Licence
- other-oa
- Locations
- Zurich Open Repository and Archive (University of Zurich) (acceptedVersion, other-oa)
- Econstor (Econstor) (submittedVersion)
- Zurich Open Repository and Archive (University of Zurich)
- Funders
- Bill and Melinda Gates Foundation
- Yale University
- University of Warwick
- Topics
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Life Sciences › Agricultural and Biological Sciences › Soil Science › Agricultural risk and resilience
- Social Sciences › Sociology and Political Science › Income, Poverty, and Inequality
- Keywords
- poverty, income risk, cognitive function, attention, decision-making, rainfall shocks, farmers, poverty trap, Brazil
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