Poverty identity and preference for challenge: Evidence from the U.S. and India

• Published in: Journal of economic psychology 2020-01, Vol.76, p.102214, Article 102214
• Main Authors: Banker, Sachin, Bhanot, Syon P., Deshpande, Aishwarya
• Format: Article
• Language: English
• Subjects: Behavioral economics; Scarcity; Social identity; Verbal self-affirmation
• ISSN: 0167-4870; 1872-7719
• DOI: 10.1016/j.joep.2019.102214

•People develop a strong “poverty identity” due to persistent financial insecurity.•We suggest ex-ante identity strength impacts preferences for challenging tasks.•In a US lab experiment, poverty identity salience reduces preference for challenge.•In a lab-in-field study in India, affirmation increases preference for challenge. One’s personal identity can play an important role in decision-making. We propose that a key identity that shapes behavior among poor populations is conceptualizing oneself as financially insecure, which we term “poverty identity.” Two experiments suggest that this identity can influence one’s propensity to engage in challenging tasks. We first demonstrate in a lab experiment with students that making financial insecurity temporarily salient can reduce preference for challenging tasks. Subsequently, in a lab-in-field experiment conducted in Dharavi, a slum in Mumbai, India, we show that a verbal self-affirmation intervention involving simple, one-on-one conversations with each individual can counteract the effects of persistent identity salience for the poor by fostering greater preference for more challenging labor tasks. We suggest that the persistence of scarcity can make poverty a continually salient characteristic by which the truly impoverished define who they are. Further, we outline an identity-based theoretical framework that explains behavior among people who temporarily feel poor but also suggests that similar perturbations in identity salience may have a negligible impact on behavior among the very poor. These findings have important implications for models of identity and policy design aimed at improving well-being for disadvantaged populations.