Poverty and scarcity

Proposed and experimental methods

Methods that are proposed, under trial, approved in some places, or tried and then failed. Each shows a stage label and an evidence rating. A stage label shows how far a method has progressed, not whether it works. The stage labels are explained on the economic factor page.

• Large-scale cash and its effects on whole local economies (Large trial, B). Builds on the cash transfer entry in "Learned helplessness and low sense of control" in the psychological factors by testing what happens to neighbors, firms, and prices when many households in an area receive cash at once. In rural Kenya, one-time transfers of about $1,000 went to over 10,500 poor households across 653 randomized villages, a shock of over 15% of local GDP. Recipients gained in consumption and assets, non-recipient households and firms also gained, price inflation was minimal, and the estimated local transfer multiplier was 2.5 (Egger et al., 2022). It is one trial in one region and has not been repeated elsewhere.
• Graduation programs, long-run and government-run results (Large trial, B). Builds on the graduation program entry in "Learned helplessness and low sense of control" in the psychological factors with longer follow-up and a government delivery test. In West Bengal, India, 514 of 978 eligible households were offered a large asset transfer plus support (266 accepted), and ten years later the offered group had higher consumption (0.6 standard deviations), income (0.3), food security (0.1), and health (0.2), with gains growing for seven years and then persisting (Banerjee, Duflo, and Sharma, 2021). In Niger, a government cash transfer program added group savings, coaching, and either a cash grant, psychosocial support, or both for 4,712 households in 322 villages. All three versions raised consumption at about 18 months (0.12, 0.18, and 0.25 standard deviations), and the version with psychosocial support and no large grant was the most cost-effective (benefit-cost ratio 1.709 versus 0.796 for the capital-only version) (Bossuroy et al., 2022). Effects beyond 18 months in Niger are not yet known.
• Easing financial worry to restore attention at work (Early trial, contested, C). This tests the scarcity idea directly by changing the timing of pay. Among 408 low-income piece-rate workers in rural India, those paid part of their wages early (mostly used to pay debts and buy essentials) raised output by about 7% (0.11 standard deviations) and made fewer costly mistakes, with effects concentrated among the most financially constrained (Kaur et al., 2025). A U.S. study that randomly surveyed low-income households before or after payday found more present-biased money choices before payday but no differences in cognitive performance, risk-taking, or decision quality (Carvalho, Meier, and Wang, 2016), so whether money shortage reliably lowers cognitive function is still disputed.
• Not shown to help: Microcredit for poor households (In wide use, A). Small loans to poor households and microenterprises were long promoted as a way out of poverty. Six randomized evaluations in six countries on four continents found effects that were "modestly positive, but not transformative" (Banerjee, Karlan, and Zinman, 2015), and a reanalysis of seven randomized experiments concluded the effect on household business and consumption is unlikely to be transformative and may be negligible, with larger but more variable effects for households with prior business experience (Meager, 2019).

Sources cited on this page

1. Mullainathan, S., & Shafir, E. (2013). Scarcity: Why Having Too Little Means So Much. New York: Times Books. C Limited
2. Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. Science, 341, 976-980. DOI D Contested
3. World Bank (2026, March 26). March 2026 global poverty update from the World Bank. Data Blog B Moderate: agency estimate
4. Carvalho, L. S., Meier, S., & Wang, S. W. (2016). Poverty and economic decision-making: evidence from changes in financial resources at payday. American Economic Review, 106(2), 260-284. DOI B Moderate
5. Banerjee, A., Duflo, E., & Sharma, G. (2021). Long-term effects of the Targeting the Ultra Poor program. American Economic Review: Insights, 3(4), 471-486. link B Moderate
6. Banerjee, A., Karlan, D., & Zinman, J. (2015). Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied Economics, 7(1), 1-21. link A Strong
7. Bossuroy, T., Goldstein, M., Karimou, B., Karlan, D., Kazianga, H., Parienté, W., et al. (2022). Tackling psychosocial and capital constraints to alleviate poverty. Nature, 605(7909), 291-297. link B Moderate
8. Egger, D., Haushofer, J., Miguel, E., Niehaus, P., & Walker, M. (2022). General equilibrium effects of cash transfers: Experimental evidence from Kenya. Econometrica, 90(6), 2603-2643. link B Moderate
9. Kaur, S., Mullainathan, S., Oh, S., & Schilbach, F. (2025). Do financial concerns make workers less productive? The Quarterly Journal of Economics, 140(1), 635-689. link B Moderate
10. Meager, R. (2019). Understanding the average impact of microcredit expansions: A Bayesian hierarchical analysis of seven randomized experiments. American Economic Journal: Applied Economics, 11(1), 57-91. link A Strong

Every source for this factor is listed on the economic factor page.