Applied Economics Seminar Series. The impact of financial shocks on decision making: Experimental evidence from Kenya

Published: 3 November 2023

22 November. Dr Matthias Sutter, IZA Institute of Labor Economics

Dr Matthias Sutter, IZA Institute of Labor Economics

"The impact of financial shocks on decision making: Experimental evidence from Kenya"
Wednesday, 22 November. 3 pm
Online seminar

Register here

Abstract

We investigate the impact of financial shocks on economic decision-making among low-income individuals. Using a lab-in-the-field experiment with 1,917 factory workers in Nairobi, we manipulated poverty levels and financial shocks by varying monthly paydays and credit exposures. Our results reveal significant impacts on several dimensions of economic decision-making, including time preferences, higher order risk preferences, and competitiveness. These findings are further supported by a cluster analysis revealing distinct clusters of economic preferences among participants. Overall, this study highlights the importance of considering the impact of financial shocks in understanding economic decision-making in low-income populations facing persistent poverty.

Bio

Matthias Sutter (1968) is Director at the Max Planck Institute for Research on Collective Goods in Bonn. He is also part-time professor of experimental economics at the Universities of Cologne and Innsbruck. Previously, he was professor at the European University Institute in Florence, University of Gothenburg, or Max Planck Institute of Economics. He received his PhD in economics from the University of Innsbruck where he also finished his habilitation. His research covers a wide range of topics, including the development of economic decision making with age or field experiments in firms. He has published his work, among others, in Science and all top-5 journals in economics. He is currently Associate Editor, among others, of "Management Science" and  "Quantitative Economics", and was an AE for "Journal of the European Economic Association". Sutter also writes popular science books that hit the Austrian bestseller lists; in 2014 "Die Entdeckung der Geduld", also translated into Chinese and Turkish, and in 2022 "Der menschliche Faktor oder worauf es im Berufsleben ankommt", published in 2023 also in English as "Behavioral Economics for Leaders".

For further information, please contact business-school-research@glasgow.ac.uk

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First published: 3 November 2023

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