Poor and Inattentive
Community in Cape Town, South Africa. Photo by Filiz Elaerts on Unsplash
Policy Context
There’s mixed evidence concerning whether poverty “causes” individuals to exhibit more behavioral biases. In an influential paper, Mullainathan and Shafir argue that the condition of poverty itself may impede cognitive function, leading individuals to appear more myopic and make more mistakes (2013). Despite the importance of this question for social and economic development, little causal evidence exists to inform programmatic decisions. This project examines the relationship between poverty and one behavioral bias: inattention, and explores how the condition of poverty may impact the attention of those experiencing it.
Study Design
Collaborating with a firm in South Africa, researchers set up a randomized evaluation to examine how attentive its workers are depending on whether they are in a rich state (after receiving cash) or in a poor state (prior to payday). Workers at the firm are randomized into one of two conditions: 1) a surprise payday condition where they receive their earnings earlier in the month than usual or 2) a standard payday condition at the end of the month. Experimental tasks takes place on the surprise payday for all workers, though some workers carry out their usual work task while more likely an experimental task. Similar performance measures are collected for standard measures of attention drawing on the psychological literature.
Results and Policy Lessons
Findings from this project could be of incredible importance for the design of public policy. For instance, the finding that individuals have a lower stock of attention when experiencing poverty would suggest that important public policies that require individual decision making should be timed to coincide with when individuals are relatively rich (for instance, governments could time policies involving important decisions to harvests). If evidence suggests that the individuals experiencing poverty react to incentives, then various types of cash transfers could be an effective intervention.
Results forthcoming.
