Street Smart – Economic Decision-Making Among Urban Street Dwellers
34 Pages Posted: 29 Dec 2016
Date Written: October 12, 2016
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: Suggested Citation