Editing Behavioral economics (section)

====The psychology of poverty====
Recent research in behavioral development economics highlights how the experience of poverty itself can impair cognitive function and economic decision-making, potentially perpetuating poverty through behavioral channels. Scarcity captures attention, narrowing focus on immediate financial concerns while reducing mental “bandwidth” for other tasks.<ref>Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Times Books.</ref> While this focused attention may improve decision-making in some contexts—such as heightened price awareness <ref>Goldin, J., & Homonoff, T. A. (2013). Smoke gets in your eyes: Cigarette tax salience and regressivity. American Economic Journal: Economic Policy, 5(1), 302–336.</ref>—the overall effect of constant financial stress is detrimental. A study provides experimental evidence of this cognitive burden: when exposed to scenarios involving large financial stakes, low-income individuals in the U.S. exhibited reduced cognitive performance, while high-income individuals did not.<ref>Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. Science, 341(6149), 976–980.</ref> Complementary field evidence from Indian sugarcane farmers showed significantly lower cognitive performance before harvest (when finances are tight) compared to post-harvest, suggesting that poverty-induced cognitive load, rather than fixed individual traits, drives decision-making quality.