Illiquidity does not seem to lower the quality of decision-making

There is a new AER piece by Leandro S. Carvalho, Stephan Meier, and Stephanie W. Wang, here is the abstract:

We study the effect of financial resources on decision-making. Low-income US households are randomly assigned to receive an online survey before or after payday. The survey collects measures of cognitive function and administers risk and intertemporal choice tasks. The study design generates variation in cash, checking and savings balances, and expenditures. Before-payday participants behave as if they are more present-biased when making intertemporal choices about monetary rewards but not when making intertemporal choices about nonmonetary real-effort tasks. Nor do we find before-after differences in risk-taking, the quality of decision-making, the performance in cognitive function tasks, or in heuristic judgments.

I would describe that one as a victory for Gary Becker…

Here are ungated versions.


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