Expecting to be poor: economic threat, desperation, and spending behaviors.

Project Abstract

Purpose. Expecting financial downfalls can have bizarre or unexpected effects on behavior (Wohl et al., 2014). For example, some past studies have shown that worsening economic conditions are related to voting for harsher social policies (Rickert, 1998), increased prejudice (Butz & Yogeeswaran, 2011), superstitious behaviors (Padgett & Jorgenson, 1982). Specific to the current study is what individuals choose to spend their money on. Where one would expect that individuals would become thrifty and prudent in times of economic hardship, some past studies show that individuals engage in counterintuitive behaviors such as increased engagement in financial risk-taking such as gambling (Wohl et al., 2014.) It is argued that this behavior is due to loss aversion, as the expectation of being poor on the horizon increases the willingness to spend money in risky ways. The current study examines the role negative affect, specifically, desperation, may have on spending behaviors following an economic threat. It is expected that individuals who feel economically threatened will feel greater desperation, and that desperation is the reason individuals spend money in risky, and potentially negative, ways.

Procedure. The study is currently collecting data (current N = 23; Projected N = 80) from an undergraduate sample. Participants are randomly assigned to be exposed to an economic threat (i.e., reminded of the possibility for a poor financial future) or not, then we measured a various emotional outcomes, and individual differences (e.g., financial well-being, self-control, delay of gratification skills). Finally, participants are offered a hypothetical $1000 to spend as they please on various items.

Results. It is expected that, in line with past research, the economic threat condition will choose to spend more money on more negative/irresponsible items (e.g., lottery tickets, junk food) than the control group. Moreover, we expect that the ratio of negative to positive items (e.g., rent) will be larger for the economic threat condition than the control condition. The analysis will consist of t-tests, as well as a mediation analysis that examines the role of the emotion of desperation in their financial decision-making. Preliminary analysis of the current sample indicated a significant difference between the groups on levels of state desperation in line with prediction, t(21) = 2.17, p = .042.

Conclusion. Understanding why individuals expecting economic hardship would choose to spend resources in risky ways is important. Risky spending may be one way to alleviate the negativity one feels when financially deprived.

Conference

Midwestern Psychological Association Psi Chi (The International Honor Society in Psychology)

Funding Type

Travel Grant

Academic College

College of Humanities and Fine Arts

Area/Major/Minor

Psychology & 2nd Major Sociology

Degree

Psychology & 2nd Major Sociology

Classification

Senior

Name

Jana Hackathorn, PhD

Academic College

College of Humanities and Fine Arts

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