Poverty-related bandwidth constraints reduce the value of consumption

Abstract

Poverty confers many costs on individuals, primarily through direct material deprivation. We hypothesize that these costs may be understated: Poverty may also reduce human welfare by decreasing the experiential value of what little the poor are able to consume via reduced bandwidth (cognitive resources)- exerting a de facto "tax" on the value of consumption. We test this hypothesis using a randomized controlled trial in which we experimentally simulate key aspects of poverty that impair bandwidth via methods commonly used in laboratory studies (e.g., memorizing sequences) and via introducing stressors commonly associated with life in poverty (e.g., thinking about financial security and experiencing thirst). Participants then engaged in consumption activities and were asked to rate their enjoyment of these activities. Consistent with our hypothesis, the randomly assigned treatments designed to reduce bandwidth significantly and meaningfully reduced ratings of the consumption activities, with the strongest effects on the consumption of food. Our results shed additional light on how the consequences of poverty on human welfare may compound and motivate future work on the full scope of returns to poverty alleviation efforts.