The Effect of Financial Hardship on Children’s Cognitive Function

Gebert, Katharina [Browse]
Senior thesis
55 pages


Shafir, Eldar [Browse]
Haushofer, Johannes [Browse]
Princeton University. Department of Psychology [Browse]
Class year
Summary note
Poor individuals appear to make worse decisions than rich individuals. This relationship seems to develop during childhood, becoming exacerbated overtime. Though it was long believed low-income individuals were simply less competent, recent work has come to show that monetary scarcity comes with a psychology of its own. A causal link between poverty and cognitive function has been established in adults; however, it remains unknown whether this effect can be seen in children. I hypothesize that poverty does indeed directly impede cognitive function in children, and present here a study that tests this hypothesis. In a laboratory experiment with low-income youth from Princeton, New Jersey, I first randomly assigned subjects to a neutral or financial condition. Subsequently, I experimentally induced neutral or financial thoughts, with participants performing cognitive tasks afterwards. Contrary to what was hypothesized, I found that experimentally induced non-financial thoughts reduced cognitive performance among participants, as compared to financial thoughts. I suggest that this is because, here, the neutral concerns consumed more mental resources than expected, leaving less for other tasks. These data provide a preliminary, unexamined perspective and help provide direction for future research in the field. I discuss some implications for poverty policy as well. Keywords: children, poverty, cognitive function

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