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Gladstone, Joe J.; Jachimowicz, Jon M.; Greenberg, Adam Eric; Galinsky, Adam D. Financial shame spirals: How shame intensifies financial hardship. Organizational Behavior & Human Decision Processes. Nov2021, Vol. 167, p42-56.ÌýÌýÌýÌý

We propose that shame can be a driver and exacerbator of financial hardship. • Shame leads individuals to withdraw and disengage from their financial situation. • Six experimental, archival, and longitudinal studies offer empirical support. • Shame is more strongly associated with financial hardship than guilt. Financial hardship is an established source of shame. This research explores whether shame is also a driver and exacerbator of financial hardship. Six experimental, archival, and correlational studies (N = 9,110)—including data from customer bank account histories and several longitudinal surveys that allow for participant fixed effects and identical twin comparisons—provide evidence for a vicious cycle between shame and financial hardship: Shame induces financial withdrawal, which increases the probability of counterproductive financial decisions that only deepen one's financial hardship. Consistent with this model, shame was a stronger driver of financial hardship than the related emotion of guilt because shame increases withdrawal behaviors more than guilt. We also found that a theoretically motivated intervention—affirming acts of kindness—can break this cycle by reducing the link between financial shame and financial disengagement. This research suggests that shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship.ÌýÌýÌý

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