American Economic Review Vol. 106 No. 2 2016

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

Leandro Carvalho¹; Stephan Meier²; Stephanie W. Wang³

¹ Center for Economic and Social Research, University of Southern California, 635 Downey Way, Los Angeles, CA 90089-3332 (e-mail: ) · ² Graduate School of Business, Columbia University, Uris Hall, 3022 Broadway, New York, NY 10027 (e-mail: ) · ³ Dietrich School of Arts and Sciences, Department of Economics, University of Pittsburgh, 4901 Wesley W. Posvar Hall, 230 South Bouquet Street, Pittsburgh, PA 15260 (e-mail: )

Abstract

We study the effect of financial resources on decision-making. Low-income U.S. 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 non-monetary 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.

DOI

10.1257/aer.20140481

Volume

106

Issue

2

Pages

260-284

Language

en

Sources

crossref openalex bibtex:phds-export.bib

Cite

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