Essays on the Relationship Between Behavior, Well-Being, and Poverty

Under the utilitarian view of the world, economists see individuals as rational, utility-maximizing agents. However, there is empirical evidence that many of the assumptions of those models do not always hold. Then, studying the behavior of individuals without predetermined assumptions of how they will act can help better understand their choices and consequently design policies that have a higher impact on their well-being. This is of particular importance for people who live in poverty as their behaviors might generate a vicious cycle that exacerbates their poverty condition. My dissertation aims at understanding what drives the behavior of the poor and which policies and factors can improve their well-being.

The first essay, The effect of a stress-reducing mindfulness exercise on the decision-making of the poor, tests a mindfulness-based policy aimed at reducing stress and improving the decision-making of low-income individuals. I do this through a pilot randomized field experiment implemented in two sites that offer subsidized childcare in Chicago. This study helps understand how a brief mindfulness exercise can have positive effects on the cognitive resources available for people who are poor to improve their decision-making.

The second essay, Mind in Focus: A field experiment on cognitive scarcity using neuroscience and technology, builds on what was learned from the pilot experiment and tests whether changes in stress affect executive function of the poor differently to that of the non-poor. I used a randomized field experiment with poor and non-poor participants in Chicago to do this. By using a precise and reliable measure of physiological stress as well as a self-reported measure of stress, I improve on the literature in explaining a possible mechanism behind the behavior of the poor and non-poor. I am able to show the importance of measuring outcomes as accurately as possible and how this can change the policy implications.

Both of these essays try to present an alternative policy that can improve the well-being of the poor at a very low cost and that can supplement other efforts toward that goal.

People make choices that are not necessarily aligned to their preferences. Then, studying subjective well-being gives a better understanding of the preferences behind these choices. The third essay, The relationship between income and subjective well-being using Mexico's 65 and more pension program, is a quasi-experimental study to understand how relevant income is to subjective well-being of a low-income population in Mexico. I use an unconditional cash transfer program in the form of an old-age pension and construct two comparison groups that allow me to find a causal relationship between increases in income and subjective well-being. I show that increases in income have a very small effect on subjective well-being of this population and that the effects disappear when controlling for unobserved characteristics.

Then, policies should be aimed at meeting basic needs of the poorest to reduce the stress associated to poverty, but it should also be kept in mind that other factors might be more important than income for well-being once those needs are met.