Anandi Mani

Poverty Impedes Cognitive Function

Burden of Poverty Lacking money or time can lead one to make poorer decisions, possibly because poverty imposes a cognitive load that saps attention and reduces effort. Mani et al. (p. 976; see the Perspective by Vohs) gathered evidence from shoppers in a New Jersey mall and from farmers in Tamil Nadu, India. They found that considering a projected financial decision, such as how to pay for a car repair, affects peoples performance on unrelated spatial and reasoning tasks. Lower-income individuals performed poorly if the repairs were expensive but did fine if the cost was low, whereas higher-income individuals performed well in both conditions, as if the projected financial burden imposed no cognitive pressure. Similarly, the sugarcane farmers from Tamil Nadu performed these tasks better after harvest than before. Being poor is a state of mind. [Also see Perspective by Vohs] The poor often behave in less capable ways, which can further perpetuate poverty. We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis. First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich. This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity. We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor. We discuss some implications for poverty policy.

Income Distribution and the Demand Constraint

This paper argues thatthe interaction between inequality and the demand patterns forgoods is a potential source of persistent inequality. Incomedistribution, in the presence of non-homothetic preferences,affects the demand for goods and, due to differences in factorintensities across sectors, it alters the return to factors ofproduction and the initial distribution of income. Low inequalityleads to high demand for medium skilled intensive goods, providinga bridge over which low skill dynasties may transition to thehigh-skilled sector in the long run. Under high inequality however,the initial lack of demand for medium skilled labor breachesthis bridge from poverty to prosperity and inequality persists.

Choosing the Right Pond: Social Approval and Occupational Choice

We model the endogenous emergence of social perceptions about occupations and their impact on occupational choice. In particular, an individual’s social approval increases with his communitys perception of his skill in his chosen career. These perceptions vary across communities because individuals better assess the skill of those in occupations similar to their own. Such imperfect assessment can distort choices away from comparative advantage. When skill distributions differ across occupations and/or correlate positively, the community perceives one occupation more favorably. This favored sector experiences overcrowding, but misallocation occurs across both sectors. Furthermore, a positive skill correlation can produce multiple steady states.

Can Political Empowerment Help Economic Empowerment? Women Leaders and Female Labor Force Participation in India

This study examines whether political empowerment of women affects their economic participation. In the context of mandated political representation reform for women in India, the study finds that the length of exposure to women politicians affects overall female labor force participation. These effects seem to arise through direct and indirect channels: political representation of women directly affects hours of work assigned to women under the recent national public works program, the Mahatma Gandhi National Rural Employment Guarantee Scheme. In addition, the level of access to public goods, as influenced by exposure to women leaders over time, increases the likelihood of women being engaged in the labor force. The findings suggest that womens participation in politics could be a useful policy tool to increase both the supply of and the demand for labor market opportunities for women, potentially helping to stem Indias declining female labor force participation rate.

Response to Comment on “Poverty Impedes Cognitive Function”

Wicherts and Scholten criticized our study on statistical and psychometric grounds. We show that (i) using a continuous income variable, the interaction between income, and experimental manipulation remains reliable across our experiments; (ii) our results in the cognitive control task do not appear driven by ceiling effects; and (iii) our observed post-harvest improvement is robust to the presence of learning.