Neurobiological Poverty Traps

Poverty remains one of the most pressing problems facing the world. In this paper, I review evidence suggesting that poverty has particular neurobiological consequences, and that these consequences in turn lead to suboptimal economic behaviors which exacerbate and perpetuate poverty. Speci cally, I argue that poverty raises levels of the stress hormone cortisol, causes dysregulation and altered gene-environment interactions in serotonergic neurotransmission, and leads to increased levels of testosterone. These neurobiological e ects impair executive function and exacerbate behavioral biases in economic choice, and thus contribute to the perpetuation of poverty. JEL Classi cation: D03, D87, I30, O12 ∗Institute for Empirical Economics, University of Zurich, Switzerland. E-Mail: [email protected]