10. Poverty and Economic Development

Question 1

What are possible explanations for poverty?

Answer 1

• environmental factors- because of circumstance, lack of education, bad health
• psychological factors- resource scarcity creates its own mindset which feeds into greater poverty

Question 2

What did the angry birds experimental test show?

Answer 2

The poor participants put in more effort per shot and got more points per shot than the rich

Question 3

How do liquidity constraints affect financial decisions?

Answer 3

Liquidity constraints increase present bias

Question 4

What is the relationship between life satisfaction and income?

Answer 4

They are positively correlated within and between countries

Question 5

What were the results of the Kenyan experiment on stress and poverty?

Answer 5

Cash increased happiness and received stress

Question 6

Results of Cohn et al experiment with electric shocks

Answer 6

Those who experienced the painful electric shocks experienced fear and subsequently were more risk averse

Question 7

What is our conclusion on the cause of poverty?

Answer 7

Being poor makes people unhappy and stressed which in turn makes them risk averse and impatient which In turn reinforced their poverty

Question 8

Prosociality

Answer 8

An important aspect of human personality that affects a wide range of social and economic outcomes

Question 9

What is the aim of the study by Kesse et al on prosociality?

Answer 9

Does exogenous enrichment of the social environment caused more trust and altruism in disadvantaged children?

Question 10

Describe the experiment on altruism by Kesse

Answer 10

• a year long mentoring programme was provided to some low SES children
• after the mentoring programme ended, the altruism and trust levels of the children were measured through a dictator game and trust questions. •results were compared to the low and high SES control groups

Question 11

Results of the prosociality experiment by Kesse

Answer 11

• initially high SES are more prosocial than low SES
• after treatment low SES and high SES control are similar in prosociality, they are both significantly greater than low SES control group
• results lasted when checked 2 years later

Question 12

What did Sunde et al find when looking at patience across the globe?

Answer 12

• there is a positive relationship between patience and GDP per capita/ savings: R&D, and human capital
• these relationships can’t yet be proved to be causal though