Evidence for Opportunity Cost Neglect in the Poor

The persistence of cognitive biases in financial decisions across economic groups

While economic inequality continues to rise within countries, efforts to address it have been largely ineffective, particularly those involving behavioral approaches. It is often implied but not tested that choice patterns among low-income individuals may be a factor impeding behavioral interventions aimed at improving upward economic mobility. To test this, we assessed rates of ten cognitive biases across nearly 5000 participants from 27 countries. Our analyses were primarily focused on 1458 individuals that were either low-income adults or individuals who grew up in disadvantaged households but had above-average financial well-being as adults, known as positive deviants. Using discrete and complex models, we find evidence of no differences within or between groups or countries. We therefore conclude that choices impeded by cognitive biases alone cannot explain why some individuals do not experience upward economic mobility. Policies must combine both behavioral and structural interventions to improve financial well-being across populations.

Perceptions of the benefits of the basic medical insurance system among the insured: a mixed methods research of a northern city in China

Background

The perceptions of the benefits of the basic medical insurance system among the insured not only reflect the system's performance but also the public's basic medical insurance policy literacy, valuable information for countries that have entered the stage of deepening reform. This study aims to examine the factors that affect the perceptions of the benefits of the basic medical insurance system in China, diagnose the key problems, and propose corresponding measures for improvement.

Methods

A mixed method design was used. Data for the quantitative study were obtained from a cross-sectional questionnaire survey (n = 1,045) of residents of Harbin who had enrolled for basic medical insurance system. A quota sampling method was further adopted. A multivariate logistic regression model was then employed to identify the factors influencing the perceptions of the benefits of the basic medical insurance system, followed by semi-structured interviews with 30 conveniently selected key informants. Interpretative phenomenological analysis was used to analyze the interview data.

Results

Approximately 44% of insured persons reported low perceptions of benefits. The logistic regression model showed that low perceptions of the benefits of the basic medical insurance system was positively correlated with the experience of daily drug purchases (OR = 1.967), perceptions of recognition with basic medical insurance system (OR = 1.948), perceptions of the financial burden of participation costs (OR = 1.887), perceptions of the convenience of using basic medical insurance for medical treatment (OR = 1.770), perceptions of the financial burden of daily drug purchases costs (OR = 1.721), perceptions of the financial burden of hospitalization costs (OR = 1.570), and type of basic medical insurance system (OR = 1.456). The results of the qualitative analysis showed that the key problem areas of perceptions of the benefits of the basic medical insurance system were: (I) system design of basic medical insurance; (II) intuitive cognition of the insured; (III) rational cognition of the insured; and (IV) the system environment.

Conclusions

Improving the perceptions of the benefits of the basic medical insurance system of the insured requires joint efforts in improving system design and implementation, exploring effective publicity methods of basic medical insurance system information, supporting public policy literacy, and promoting the health system environment.

Subjective status and perceived legitimacy across countries

The relationships between subjective status and perceived legitimacy are important for understanding the extent to which people with low status are complicit in their oppression. We use novel data from 66 samples and 30 countries (N = 12,788) and find that people with higher status see the social system as more legitimate than those with lower status, but there is variation across people and countries. The association between subjective status and perceived legitimacy was never negative at any levels of eight moderator variables, although the positive association was sometimes reduced. Although not always consistent with hypotheses, group identification, self-esteem, and beliefs in social mobility were all associated with perceived legitimacy among people who have low subjective status. These findings enrich our understanding of the relationship between social status and legitimacy.

Opportunity Cost in Monetary Donation Decisions to Non-identified and Identified Victims

Do people consider alternative uses of money (i.e., opportunity cost) when asked to donate to a charitable cause? To answer this question, we examined the effect of providing versus not providing participants with an opportunity cost reminder when they are asked to donate money to causes with identified and non-identified victims. The results of two studies show that when making one-time donation decisions, people become less willing to donate to charity when reminded of opportunity cost, but mainly for non-identified victims. Moreover, framing the opportunity cost reminder as prosocial versus proself did not influence willingness to donate. Overall, our evidence suggests that opportunity cost reminders influence people's donation behavior depending on whether charities identify supported victims or not.

Evidence for Opportunity Cost Neglect in the Poor

People often neglect opportunity costs: They do not fully take into account forgone alternatives outside of a particular choice set. Several scholars have suggested that poor people should be more likely to spontaneously consider opportunity costs, because budget constraints should lead to an increased focus on trade-offs. We did not find support for this hypothesis in five high-powered experiments (total N = 2325). The experiments used different products (both material and experiential) with both high and low prices (from $8.50 to $249.99) and different methods of reminding participants of opportunity costs. High-income and low-income participants showed an equally strong decrease in willingness to buy when reminded of opportunity costs, implying that both the rich and the poor neglect opportunity costs.