Consumption seasonality is prevalent across poor and rich countries, from African farmers to US food stamp recipients. Such consumption fluctuations—in which households seem to “over-consume” in early periods and have “too little” saved in later periods—present a puzzle, violating neoclassical consumption smoothing. This project posits that cognitive constraints lead to mis-optimization in dynamic intertemporal problems such as consumption smoothing, in ways that can generate declining consumption profiles over time.
We implement a field experiment in rural Zambia to test for the role of cognitive constraints. In this setting, farmers harvest maize once per year, and then consume it over the next 12 months, mimicking a standard “eat-the-pie” problem. Existing data shows that households substantially reduce food consumption in the months leading up to the next harvest, a period that is locally known as the annual “hungry season”.
Households are randomly assigned to a control condition or a treatment condition, which manipulates the cognitive burden of solving the consumption planning problem after harvest. We will measure impacts on (i) demand for planning aids, (ii) accuracy of savings forecasts and beliefs about future consumption, savings and labor supply (iii) demand for luxury goods (iv) consumption profiles, (v) savings and (vi) labor supply