Street Smart – Economic Decision-Making Among Urban Street Dwellers

34 Pages Posted: 29 Dec 2016

See all articles by Niilo Luotonen

Niilo Luotonen

Hanken Centre for Corporate Governance

Date Written: October 12, 2016

Abstract

This study provides first field evidence on the effect of financial resources on real economic decisions. A sudden increase in inventory costs tightens consumption budgets in a population of self-employed vendors of a Big Issue-type “street paper”. After the budget shock, vendors become more responsive to expected demand in their stock-up decisions, and increase their inventory turnover. The timing of the behavior changes is consistent with the tightening budget having a causal impact on vendors’ decisions. My findings suggest that binding budget constraints are unlikely to drive the results, indicating that cognition-related factors may be important in explaining the economic decisions of those who have little.

Keywords: behavioral economics, economic decision-making, resource scarcity, poverty

JEL Classification: D01, D14, D81

Suggested Citation

Luotonen, Niilo, Street Smart – Economic Decision-Making Among Urban Street Dwellers (October 12, 2016). Available at SSRN: https://ssrn.com/abstract=2891336 or http://dx.doi.org/10.2139/ssrn.2891336

Niilo Luotonen (Contact Author)

Hanken Centre for Corporate Governance ( email )

Hanken School of Economics
Helsinki
Finland

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