From financial scarcity to risk and time preferences: the role of executive functions

IntroductionUnderstanding how financial scarcity influences intertemporal decision-making is crucial for designing effective poverty-alleviation policies. However, the cognitive mechanisms underlying this relationship remain insufficiently explored. This study examines the correlational patterns through which financial scarcity relates to risk and time preferences, with a particular focus on the mediating role of executive functions, specifically planning and initiating, attention, and self-control and self-monitoring.MethodsCross-sectional survey data were collected from 468 rural residents in two historically impoverished counties in Yunnan Province, China. Financial scarcity was assessed using the Psychological Inventory of Financial Scarcity (PIFS), while executive functions were measured with a culturally adapted form of the Amsterdam Executive Function Inventory. Risk and time preferences were assessed through a lottery choice experiment and a money-earlier-or-later allocation task, respectively. Structural equation modeling with bootstrapped mediation tests was employed for data analysis.ResultsThe results indicate that financial scarcity is significantly associated with lower scores across all three dimensions of executive functioning. Critically, planning and initiating ability emerged as a consistent indirect pathway, yet with a notable divergence across preference domains: higher financial scarcity was associated with lower planning capacity, which in turn was associated with lower risk aversion, whereas lower planning ability was associated with decreased future orientation.DiscussionThese findings are consistent with a function-selective refinement of the bandwidth model of scarcity and reveal a counterintuitive pattern in risk-related decisions, suggesting that cognitive depletion may paradoxically reduce risk aversion rather than uniformly impairing prudent choice. The study highlights the importance of designing targeted cognitive-scaffolding interventions to support sound decision-making under conditions of financial constraint.