The Psychological Effects of Poverty on Investments in Children’s Human Capital

Investing in early childhood development in preschool and at home

“…Poverty and chronic economic strain may also undermine parenting quality (Gershoff et al 2007). Stress may tax parents' ability to acquire and process information in a way that supports their investments in their child's skill development (Lichand et al 2021).…”

Does Scarcity Reduce Cooperation? Experimental Evidence from Rural Tanzania

“…A growing literature has documented the psychological impacts of poverty on decisionmaking (Shah, Shafir, and Mullainathan 2015;Lichand et al 2020). At least to some extent, it is the awareness of trade-offs (e.g.…”

“…self-control (Banerjee and Mullainathan 2010), risk-aversion (Yesuf andBluffstone 2009 andBlalock, Just, andSimon 2007), and borrowing choices Shafir 2012 andAgarwal, Skiba, andTobacman 2009). In particular, we contribute to the emergent literature concerned with the causal effect of scarcity on economic behaviors (e.g., Miguel 2005;Shah, Mullainathan, and Shafir 2012;Haushofer, Schunk, and Fehr 2013;Prediger, Vollan, and Herrmann 2014;Shah, Shafir, and Mullainathan 2015;Carvalho, Meier, and Wang 2016;Lichand et al 2020). Our identification strategy builds on the seminal study by Mani et al (2013), who exploit the timing of sugar cane harvests in India to investigate how scarcity influences cognitive abilities.…”

Export Product Diversification, Poverty and Tax Revenue in Developing Countries

“…While the macroeconomic effects of export product diversification have received a large attention from scholars and researchers (see studies cited above), the macroeconomic effects of poverty have been less explored. For example, the extent of the related literature has focused on the effect of poverty on human capital (e.g., Bain et al 2013;Hanson et al 2013;Haushofer and Fehr, 2014;Lichand et al, 2020), labour productivity (e.g., Hill and Sandfort, 1995), economic growth (e.g., López, 2006;Ravallion, 2012Ravallion, , 2016, economic development (e.g., Nakabashi, 2018), export product diversification (e.g., Gnangnon, 2019b) and trade openness (e.g., Gnangnon, 2019c). To the best of our knowledge, there is no published work on the effect of poverty on public revenue, including tax revenue.…”

“…Higher poverty levels reflect the lack of resources to meet the minimum basic necessities of life. As a result, a rise in poverty rates leads to lower consumption (e.g., Blocker et al, 2013;Chakravarti, 2006;Ravallion, 2012), lower investment -for example -in human capital (e.g., Bain et al 2013;Hanson et al 2013;Haushofer and Fehr, 2014;Lichand et al, 2020), lower productivity (e.g., Breunig and Majeed, 2020;Hill and Sandfort, 1995), lower economic growth (e.g., López, 2006;Ravallion, 2012Ravallion, , 2016, and lower economic development (e.g., Nakabashi, 2018). The decline in consumption due to the rise in poverty rates would result in lower indirect tax revenue, including through lower VAT and excises tax revenue, and eventually import tariff revenue (if the poverty-related fall in consumption translates into lower imports).…”