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Erscheinungsjahr: 
2020
Schriftenreihe/Nr.: 
Working Paper No. 341
Verlag: 
University of Zurich, Department of Economics, Zurich
Zusammenfassung: 
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.
Schlagwörter: 
uncertainty
attention
psychology of poverty
scarcity
JEL: 
D81
D91
I32
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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