Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/214186
Authors: 
Lichand, Guilherme
Mani, Anandi
Year of Publication: 
2020
Series/Report no.: 
Working Paper 341
Abstract: 
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.
Subjects: 
uncertainty
attention
psychology of poverty
scarcity
JEL: 
D81
D91
I32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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