Research on Poverty and Saving Behavior- based on the Perspective of Scarcity Mentality and Time Preference

Research Article
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Research on Poverty and Saving Behavior- based on the Perspective of Scarcity Mentality and Time Preference

Yuxin Ren 1*
  • 1 Shandong University    
  • *corresponding author 201900810216@mail.sdu.edu.cn
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/14/20230834
AEMPS Vol.14
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-71-3
ISBN (Online): 978-1-915371-72-0

Abstract

The lack of dependable savings accounts seems common to the world’s low-income group. It will greatly limit the process of becoming rich, and even cause some people who have been out of poverty to return to it again. Today, new research from the fields of behavioral economics is shedding light on how poverty may shape an individual’s saving behaviors. Hence, this article focuses on two psychological traits that are strongly associated with saving behaviors, especially for low-income groups: scarcity mindset (poverty reducing mental bandwidth) and time preference (favoring immediate rewards over long-term considerations). Through the literature reviewing, we propose a general analytical framework of “poverty-scarcity mindset-limited cognitive capacity and executive control-time preference (present bias)-saving behavior-poverty trap”. Then we present commitment programs and cognitive supports as two anti-poverty policy recommendations based on these phenomena, to promote welfare for low-waged families.

Keywords:

low-income, scarcity theory, time preference, saving behavior, anti-poverty policy

Ren,Y. (2023). Research on Poverty and Saving Behavior- based on the Perspective of Scarcity Mentality and Time Preference. Advances in Economics, Management and Political Sciences,14,258-262.
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References

[1]. Huang Zhengxue, Pan Biao&Teng Fei. (2021). The Focus, Path and Suggestions for Establishing A Long-term Income Increase Mechanism for Low-income groups. Economic Review Journal (02), 38-45+2. doi: 10.16528/j.cnki.22-1054/f.202102038

[2]. Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Macmillan.

[3]. Schilbach, F., Schofield, H., & Mullainathan, S.(2016). The psychological lives of the poor. American Economic Review, 106(5), 435–440. https://doi.org/10.1257/aer.p20161101.

[4]. Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. science, 341(6149), 976-980.

[5]. Ong, Q., Theseira, W., & Ng, I. Y. (2019). Reducing debt improves psychological functioning and changes decision-making in the poor. Proceedings of the National Academy of Sciences, 116(15), 7244-7249.

[6]. Hinson, J., Distefano, C., & Daniel, C. (2003). The internet self-perception scale: Measuring elementary students' levels of self-efficacy regarding internet use. Journal of Educational Computing Research, 29(2), 209-228.

[7]. De Wit, H., Flory, J. D., Acheson, A., McCloskey, M., & Manuck, S. B. (2007). IQ and nonplanning impulsivity are independently associated with delay discounting in middle-aged adults. Personality and Individual Differences, 42(1), 111-121.

[8]. Laibson, D. (1997). Golden eggs and hyperbolic discounting. The Quarterly Journal of Economics, 112(2), 443-478.

[9]. Ashraf, N., Karlan, D., & Yin, W. (2006). Deposit collectors. The BE Journal of Economic Analysis & Policy, 6(2).

[10]. Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of political Economy, 112(S1), S164-S187.

[11]. O'Donoghue, T., & Rabin, M. (1999). Incentives for procrastinators. The Quarterly Journal of Economics, 114(3), 769-816.

[12]. Thaler, R. H., & Sunstein, C. R. (2003). Libertarian paternalism. American economic review, 93(2), 175-179.

[13]. Bryan, C. J., Mazar, N., Jamison, J., Braithwaite, J., Dechausay, N., Fishbane, A.,... Vakis, R. (2017). Overcoming behavioral obstacles to escaping poverty. Behavioral Science & Policy, 3(1), XX–XX.

[14]. Dupas, R., & Robinson, J. (2009). Savings Constraints and Microenterprise Deveiopment: Evidence from a Field Experiment.„. NBER Working Paper Series, 14693.

[15]. Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2016). Getting to the top of mind: How reminders increase saving. Management Science, 62(12), 3393-3411.

[16]. Ashraf, N., Karlan, D. S., & Yin, W. (2006). Household decision making and savings impacts: further evidence from a commitment savings product in the Philippines. Yale University Economic Growth Center Discussion Paper, (939).

Cite this article

Ren,Y. (2023). Research on Poverty and Saving Behavior- based on the Perspective of Scarcity Mentality and Time Preference. Advances in Economics, Management and Political Sciences,14,258-262.

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About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

ISBN：978-1-915371-71-3(Print) / 978-1-915371-72-0(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.confbps.org/
Conference date: 26 February 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.14
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Huang Zhengxue, Pan Biao&Teng Fei. (2021). The Focus, Path and Suggestions for Establishing A Long-term Income Increase Mechanism for Low-income groups. Economic Review Journal (02), 38-45+2. doi: 10.16528/j.cnki.22-1054/f.202102038

[2]. Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Macmillan.

[3]. Schilbach, F., Schofield, H., & Mullainathan, S.(2016). The psychological lives of the poor. American Economic Review, 106(5), 435–440. https://doi.org/10.1257/aer.p20161101.

[4]. Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. science, 341(6149), 976-980.

[5]. Ong, Q., Theseira, W., & Ng, I. Y. (2019). Reducing debt improves psychological functioning and changes decision-making in the poor. Proceedings of the National Academy of Sciences, 116(15), 7244-7249.

[6]. Hinson, J., Distefano, C., & Daniel, C. (2003). The internet self-perception scale: Measuring elementary students' levels of self-efficacy regarding internet use. Journal of Educational Computing Research, 29(2), 209-228.

[7]. De Wit, H., Flory, J. D., Acheson, A., McCloskey, M., & Manuck, S. B. (2007). IQ and nonplanning impulsivity are independently associated with delay discounting in middle-aged adults. Personality and Individual Differences, 42(1), 111-121.

[8]. Laibson, D. (1997). Golden eggs and hyperbolic discounting. The Quarterly Journal of Economics, 112(2), 443-478.

[9]. Ashraf, N., Karlan, D., & Yin, W. (2006). Deposit collectors. The BE Journal of Economic Analysis & Policy, 6(2).

[10]. Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of political Economy, 112(S1), S164-S187.

[11]. O'Donoghue, T., & Rabin, M. (1999). Incentives for procrastinators. The Quarterly Journal of Economics, 114(3), 769-816.

[12]. Thaler, R. H., & Sunstein, C. R. (2003). Libertarian paternalism. American economic review, 93(2), 175-179.

[13]. Bryan, C. J., Mazar, N., Jamison, J., Braithwaite, J., Dechausay, N., Fishbane, A.,... Vakis, R. (2017). Overcoming behavioral obstacles to escaping poverty. Behavioral Science & Policy, 3(1), XX–XX.

[14]. Dupas, R., & Robinson, J. (2009). Savings Constraints and Microenterprise Deveiopment: Evidence from a Field Experiment.„. NBER Working Paper Series, 14693.

[15]. Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2016). Getting to the top of mind: How reminders increase saving. Management Science, 62(12), 3393-3411.

[16]. Ashraf, N., Karlan, D. S., & Yin, W. (2006). Household decision making and savings impacts: further evidence from a commitment savings product in the Philippines. Yale University Economic Growth Center Discussion Paper, (939).

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