Psychological consequences of poverty on parental investment
Last registered on June 05, 2018

Pre-Trial

Trial Information
General Information
Title
Psychological consequences of poverty on parental investment
RCT ID
AEARCTR-0003026
Initial registration date
June 04, 2018
Last updated
June 05, 2018 2:33 PM EDT
Location(s)
Primary Investigator
Affiliation
University of Trento, University of Florence
Other Primary Investigator(s)
Additional Trial Information
Status
In development
Start date
2018-06-04
End date
2018-07-01
Secondary IDs
Abstract
A large body of empirical evidence emphasizes the role played by parents in the human capital development of children. However, little is known on the determinants of parental decisions to invest in children. Empirical evidence indicates a strong negative correlation between socio-economic status and parental investment. It has been commonly assumed that poor parents lack the information, have wrong beliefs on returns to investment or lack the knowledge of good parenting practices. In contrast, recent experimental evidence indicates that poverty taxes mental resources and shifts focus towards pressing needs at the expense of decision with long-term consequences. This study proposes a novel experimental design to test whether financial concerns associated with poverty affect the decisions of parents to invest in their children. Parents are exposed to a prime inducing financial concerns followed by an investment game. We test a potential policy instrument in one additional treatment where we lower the price of investment to assess whether changing the trade-off against pressing needs can increase focus on the decision to invest in the child.
External Link(s)
Registration Citation
Citation
Burlacu, Sergiu Constantin. 2018. "Psychological consequences of poverty on parental investment." AEA RCT Registry. June 05. https://www.socialscienceregistry.org/trials/3026/history/30353
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2018-06-04
Intervention End Date
2018-07-01
Primary Outcomes
Primary Outcomes (end points)
Spending on children goods in the experimental investment task
Spending on children goods relative to spending on groceries and temptation goods
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Spending on groceries in the investment task
Spending on temptation goods in the investment task
Aspirations/Expectations
Time preferences parameters estimated from the Cognitive Time Budgets Task
Loss Aversion
Heterogeneous treatment effects by income, time preferences and loss aversion
Heterogeneous treatment effects by distance from last paycheck
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Participants are parents, residing in the UK (80% mothers) registered on the online experimental platform Prolific (Palan and Schitter,
2017). Prolific is a rapidly growing online platform dedicated to experiments in social sciences with a fairly representative distribution of participants at national level (Peer et al., 2017). Participants are being paid on a hourly wage basis to which bonuses are added depending on choices and performance in the experiments. All the registered participants are required to fill an extended baseline survey which gives us access to a rich demographics dataset. To be eligible participants need to have a child under the age of 3 and to reside in the UK. We chose this age group because it is widely emphasized as the key period for the development of cognitive skills and because children
are less likely to be enrolled in formal education, thus spending more time with the parents.
In the investment task parents are endowed with £50 and have to choose how to allocate the endowment in an experimental market between groceries, children goods and temptation goods at the prices they are available on the market and delivered to them through services offered by major retailers (Tesco, Amazon). The available children goods focus on time investments (storybooks, activity books and other educational materials that require the engagement of the parent). Lower-income parents are expected to face the trade-off between pressing needs and investing resources in the child and falling to temptation.
The 2x2 design combines a psychological and economic manipulation. The psychological manipulation, adapted from Mani et al (2013), primes financial concerns by asking participants to reflect how they would cope with various financial scenarios. The control group will also be presented financial scenarios but of lower intensity. We expect this treatment to shift the focus of lower-income participants to pressing needs at the expense of forward looking decisions. In the context of our task, this translates to higher allocation to groceries and lower allocation to children goods.
In the economic treatment, children goods will be subsidized by offering a price discount of 50%. This treatment aims to increase the salience of investing by changing the trade-off between pressing needs and investment. If the poor are willing to invest in the child but fail to do so because their mental bandwidth is captured by pressing needs, the discount might generate an attention shift towards the opportunity of investing today at a lower cost. This treatment is motivated by the fact that even small costs at the expense of pressing needs can impede the poor from adopting beneficial technologies (Cohen and Dupas, 2010) and by the results in Shah et al. (2015) who find that the poor can be better at trade-off thinking. We expect this treatment to have a stronger impact on the poorest participants and to generate a U-shape relationship between income and investment.
If confirmed, our hypotheses can have direct policy implications for the poor: financial worries might be a main driver of underinvestment in children’s human capital and reducing the cost of parental investment can be an effective strategy to mitigate the psychological threat of financial worries.
We further investigate risk and time preferences and aspirations/expectations as potential mechanisms or moderating factors. By shifting attention to pressing needs, we could expect the priming treatment to increase both risk/loss aversion and impatience or to have stronger effects for more risk/loss averse or impatient/present biased parents.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
Treatment is not clustered
Sample size: planned number of observations
800 parents
Sample size (or number of clusters) by treatment arms
200 parents to financial concerns priming treatment
200 parents to price discount on children goods
200 parents to both treatments
200 to control group
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
Comitato Etico per la sperimentazione con l'essere umano, University of Trento
IRB Approval Date
2018-04-23
IRB Approval Number
003 2018 protocol
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers