Important life decisions are often taken under stress. More generally, it has been shown that living in the context of poverty may lead to stress (see Haushofer, Johannes and Ernst Fehr, “On the Psychology of Poverty.”  Science 344 (2014), 862–867.) Therefore, it is highly important to understand the impact of stress on economic decision-making, because if stress biases decision making (or influences individuals in other negative ways), it may actually worsen poverty, creating a negative feedback loop.

Because the study is motivated by understanding the impact of poverty, we have chosen the context of informal settlement in Nairobi, where research has shown stress levels are high. By allowing us to understand the link between poverty, stress, and economic decision-making, we hope that in the long run this study will inform the design of poverty interventions in Kenya and beyond. For example, if the study finds that stress levels affect social cooperation, this will give us reason to believe that interventions that reduce stress would have an impact on conflict.     

The objective of this study is to explore the effect of hormones on economic behavior. More specifically, it will explore how stress affects in-group/out-group behavior. This study will answer questions on whether stress increases in-group biases and tendency to protect the in-group, or whether stress increases the need for cooperation, increasing positive interaction with the out-group.

        The proposed study will administer hydrocortisone to healthy male participants, and then tests its effects on in-group/out-group behavior. A wide variety of economic games (including dictator, trust, and public goods) will be played. Participants will also play multiple other games requiring social interaction between in-group and out-group participants. The main hypothesis is that higher levels of cortisol will increase prosocial behavior towards the in-group and antisocial behavior towards the out-group.