Taxing the Poor Twice: Poverty, Bandwidth, and Utility from Consumption


Aim 1: Investigate whether experimental manipulations of common experiences of living with poverty – specifically, sleep deprivation, stress, and thirst - constrain cognitive bandwidth. Using the well-developed infrastructure in Dr.Schofield’s Development and Behavioral Economics lab situated in North Chennai, we will randomly assign individuals to receive/not receive a bandwidth altering treatment (e.g., take a nap, be presented with a vignette about financial stress, and eat food that generates thirst). Bandwidth will be assessed using a suite of commonly used metrics(cognitive tasks)which measure simple attention, complex attention, reasoning and processing speed. Aim 2: Assess whether the same experimentally manipulated conditions alter returns to consumption. All participants will engage in randomly assigned consumption activities of both positive and negative valance (e.g. watch a short comedy sketch, listen to unpleasant music) and report their enjoyment (or lack thereof) of these activities in a variety of ways. Variations of the Likert Scale and Becker–DeGroot–Marschak method will be used to measure their utility after engaging in the randomly assigned consumption activities.


Poverty confers many costs on individuals. Being poor harms health, reduces educational attainment, and lowers productivity. More insidiously, the stress and deprivation of poverty levies a tax on cognitive bandwidth, which has the potential to further reduce overall well-being via by decreasing utility from whatever little the poor are able to consume. Despite this theoretical premise, no research to our knowledge has examined the effects of poverty-related cognitive taxes on utility from consumption. Without this knowledge, interventions to improve the well-being of poor individuals will remain limited. This objective of this project is to estimate the effects of these cognitive taxes on the utility of consumption. We propose to use a randomized control trial methodology, manipulating key domains of cognitive taxes in a laboratory setting in India, to generate rigorous causal evidence linking elements of life in poverty to changes in bandwidth and corresponding changes in the value of consumption. We will experimentally alter cognitive bandwidth using standard laboratory approaches (i.e. having participants memorize numbers) as well methods developed by the research team (e.g. offering naps to reduce bandwidth constraints from sleep deprivation, a common problem among the urban poor). Participants will then undertake simple laboratorybased tasks to measure bandwidth and complete experimental activities (e.g. watching a short comedy video) and rate their value of these activities via methodologies drawn from multiple disciplines. Study procedures for the proposed pilot have been tested and validatedby the study team. The principal investigators for this study are Dr. Atheendar S. Venkataramani and Dr. Heather Schofield, and the study will be conducted in Dr. Schofield’s Behavioral and Development Economics Lab, located in of Chennai, India.

Funded By: 
Award Dates: 
July 1, 2019 - June 30, 2020