The article Psychological Effects of Poverty on Time Preferences, co-authored by our colleagues Julie Chytilová, Michal Bauer and Vojtěch Bartoš and Ian Levely, was published in the August issue of The Economic Journal, a prestigious journal that focuses on publishing high-quality and innovative economic research.
Motivated by research in behavioural economics, which highlights that delaying gratification and exercising self-control can be seen as costly mental processes, the authors tested the idea that the cognitive or emotional burdens associated with living in chronic poverty may tax self-control, and thus directly affect time preferences.
The experiments took place among farmers in Uganda: they were led to thinking about financial pre-occupations and subsequently, their intertemporal choices in an entertainment discounting task were measured. The results show that concerns about poverty-related problems increase individual preferences for earlier consumption of entertainment and the tendency to postpone unpleasant activities.
This phenomenon may contribute to the long-term nature of poverty.
We test whether an environment of poverty affects time preferences through purely psychological channels. We measured discount rates among farmers in Uganda who made decisions about when to enjoy entertainment instead of working. To circumvent the role of economic constraints, we experimentally induced thoughts about poverty-related problems, using priming techniques. We find that thinking about poverty increases the preference to consume entertainment early and to delay work. Using monitoring tools similar to eye tracking, a novel feature for this subject pool, we show that this effect is unlikely to be driven by less careful decision-making processes.
Congratulations on the publication!
Autor - Barbora Holková