Research Article: Exposure to Poverty and Productivity

Date Published: January 26, 2017

Publisher: Public Library of Science

Author(s): Patricio S. Dalton, Victor H. Gonzalez Jimenez, Charles N. Noussair, Pablo Brañas-Garza.

http://doi.org/10.1371/journal.pone.0170231

Abstract

We study whether exposure to poverty can induce affective states that decrease productivity. In a controlled laboratory setting, we find that subjects randomly assigned to a treatment, in which they view a video featuring individuals that live in extreme poverty, exhibit lower subsequent productivity compared to subjects assigned to a control treatment. Questionnaire responses, as well as facial recognition software, provide quantitative measures of the affective state evoked by the two treatments. Subjects exposed to images of poverty experience a more negative affective state than those in the control treatment. Further analysis shows that individuals in a more positive emotional state exhibit less of a treatment effect. Also, those who exhibit greater attentiveness upon viewing the poverty video are less productive. The results are consistent with the notion that exposure to poverty can induce a psychological state in individuals that adversely affects productivity.

Partial Text

The state of poverty influences productivity in at least two different ways. On the one hand, financial constraints dampen physical and cognitive performance through nutritional deficiencies [1, 2], low educational quality [3, 4], and poor health conditions [5, 6], which in turn affect productivity. On the other hand, a recent literature underscoring the psychological aspects of poverty has identified additional channels through which poverty affects individual decisions in a way that can become counterproductive. These mechanisms include risk and time preferences [7] or individuals’ motivations and aspirations [8, 9]. According to [7], the economic and social conditions under which poor people live may lower their willingness to take risks and to forgo current income in favor of higher future incomes, even though the intrinsic time and risk preferences of the poor may be identical to those of wealthier people. One plausible explanation may be that the poor are more liquidity constrained. Because of this tighter constraint, if a poor individual has the choice between a current and a delayed payment in an experiment, he or she may opt for the current payment. Similarly, the anticipation of future liquidity constraints may also induce an individual to prefer a safe payment over a risky payment. Regarding aspirations, [8] observe that, due to lower access to credit, less influential contacts or less access to relevant information, poverty makes it harder for the poor to achieve a given outcome, ceteris paribus. This exacerbates the adverse effects of a behavioural bias that both poor and wealthier people may have in setting aspirations. As a consequence, the poor are more likely to choose a low aspiration level and effort relative to the best outcome they could achieve.

Our experiment employs human subjects. Our protocol was not approved by an Institutional Review Board. However, we are fully in compliance with Dutch Law, which does not require social science research to receive prior approval from an IRB. Although Tilburg University does not have an institutionalized IRB, the Director of CentERLab or the Scientific Director of CentER screens and authorizes the content and purpose of all of the experiments taking place in the laboratory. This particular study was reviewed and approved by the Scientific Director of CentER, Professor Geert Duijsters, after the research was conducted. He formally confirmed that the study was conducted according to the principles expressed in the Declaration of Helsinki, and that this work complied with Dutch laws and Tilburg School of Economics and Management’s policy regarding the ethical treatment of human subjects. All subjects gave their signed written consent to participate in the study at the beginning of their experimental session, including consenting to be videotaped.

The results reported in the previous section indicate that subjects assigned to Poverty experience lower average performance. Moreover, participants in the two treatments exhibit differences in affective scales: under Poverty they have a more negative, self-reported and physiologically measured, affective state. They also have higher scores on the attentiveness scale, and lower scores on the joviality scale. To investigate whether the treatment difference in performance varies depending on an individual’s affective state, we employ a moderation analysis [30]. A variable is said to moderate a treatment effect if higher values of the variable are correlated with a weaker treatment effect. For example, suppose that the sample of all participants is divided into two subsamples. In one subsample are those with a relatively positive prior emotional state, and in the other those in a relatively negative one. If positive emotional valence moderates the treatment effect, the difference between treatments would be greater for the subsample in the relatively negative state than that in the more positive state.

In this section we consider whether the effect of the videos on emotional state accounts for some or all of the difference in productivity between treatments. We employ the mediation analysis developed by [31] to evaluate the extent to which affective states induced by the videos mediate the lower performance. To that end, we estimate the following system of equations:
Ai=β0+β1Poverty+C′Xi+ϵi1,Performancei=α0+α1Poverty+α2Ai+D′Xi+ϵi2.

In this paper, we have presented evidence consistent with the notion that the affective state associated with exposure to the poverty of others can decrease individual productivity. We required participants in our study to view a video and then had them perform a task that required effort and concentration. In the Poverty treatment, the video exposed participants to images of poverty, and in the control treatment, a neutral video was shown instead. Subjects assigned to the Poverty treatment exhibited lower average productivity compared to subjects that were in the Neutral condition.

 

Source:

http://doi.org/10.1371/journal.pone.0170231