Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/234944
Authors: 
Akesaka, Mika
Eibich, Peter
Hanaoka, Chie
Shigeoka, Hitoshi
Year of Publication: 
2021
Series/Report no.: 
ISER Discussion Paper No. 1133
Abstract: 
The poor live paycheck to paycheck and are repeatedly exposed to strong cyclical income fluctuations. We investigate whether such income fluctuations affect risk preference among the poor. If risk preference temporarily changes around payday, optimal decisions made before payday may no longer be optimal afterward, which could reinforce poverty. By exploiting Social Security payday cycles in the US, we find that risk preference among the poor relying heavily on Social Security changes around payday. Rather than cognitive decline before payday, the deterioration of mental health and relative deprivation may play a role. We find similar evidence among the Japanese elderly.
Subjects: 
poverty
risk preference
Social Security
mental health
relative deprivation,elderly
Health and Retirement Survey
Japanese Study of Aging and Retirement
JEL: 
D81
D91
I32
Document Type: 
Working Paper

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