Economic decision-making in poverty depletes behavioral control

Economic theory and common sense suggest that time preference can cause or perpetuate poverty. Might poverty also or instead cause impatient or impulsive behavior? This paper reports a randomized lab experiment and a partially randomized field experiment, both in India, and analysis of the American Time Use Survey. In all three studies, poverty is associated with diminished behavioral control. The primary contribution is to isolate the direction of causality from poverty to behavior; three theoretical mechanisms from psychology cannot be definitively separated. One supported explanation is that poverty, by making economic decision-making more difficult for the poor, depletes cognitive control. ∗[email protected]. Princeton University. Thank you, first, to the participants, and to Vijay and Dinesh for conducting the fieldwork in Banswara. John Papp, Deepak, Pramod, and Murli helped make the experiments happen; this would have been impossible wihtout Diane Coffey. I am thankful for comments from Anne Case, Angus Deaton, Josephine Duh, Mike Geruso, Simone Schaner, and Abby Sussman. I appreciate that Sendhil Mullainathan, Eldar Shafir, and Jiaying Zhao have offered helpful suggestions and discussed with me their complementary studies.