[Honolulu] : [University of Hawaii at Manoa], [December 2014]
Abstract
Ph.D. University of Hawaii at Manoa 2014.Includes bibliographical references.This dissertation focuses on understanding the psychological and behavioral causes of poverty. It also uses insights into the resultant behaviors that affect those that live in poverty to create solutions that leverage behavior for more effective poverty alleviation. First, I use a laboratory experiment to investigate a possible psychological determinant of sub-optimal decision-making, stress. There exists evidence that poverty causes stress, and mixed evidence for the effect of stress on economic decision-making. Contrary to evidence collected in the developed world, I find no evidence for the effect of social or physical stress on economic decision-making among urban poor in Nairobi Kenya. Next, I use a randomized controlled trial to investigate the efficacy of a novel savings mechanism based on the concept of prize-linked savings. I exploit people's love for gambling to create and test a new savings mechanism that allows people to earn savings interest probabilistically. I find that participants prefer prize-linked savings accounts to interest bearing accounts, despite the fact that prize-linked savings accounts paid less in expectation. I also find that relative to a control group, participants assigned to prize-linked savings saved significantly more money overall. My results highlight the need to understand and harness the psychological underpinnings of poverty in order to develop solutions to alleviate it. On one side, more work needs to be done to understand if the neurobiological and psychological effects of stress lead to sub-optimal decision-making. In addition, we should continue to use these insights to develop novel products and mechanisms that can help those escape this global problem
