Economic Insecurity, Psychological Distress, and Household Decision-Making under Conditions of Volatility

This thesis examines how economic insecurity shapes household decision-making through psychological distress under conditions of volatility. While development research has traditionally focused on material constraints such as income, assets, and access to services, this study argues that economic insecurity also generates persistent psychological strain that fundamentally alters how households perceive risk, evaluate trade-offs, and prioritize short- versus long-term goals.Drawing on development economics, behavioural science, and psychology, the research conceptualizes economic insecurity as sustained exposure to income volatility, inflationary pressure, and employment instability rather than as episodic shocks or static poverty. These conditions are shown to generate psychological distress—particularly anxiety and rumination—which narrows attention, increases threat sensitivity, and biases decision-making toward short-term coping strategies at the expense of long-term investments.Using a mixed-methods research design that integrates qualitative household interviews with structured measures of insecurity and distress, the study explores how these psychological mechanisms shape decisions related to health-seeking behaviour, educational investment, and labour participation. The findings suggest that psychological distress operates as a critical mediating pathway linking economic insecurity to development-relevant outcomes.By foregrounding the psychological consequences of insecurity, the thesis advances a more human-centred understanding of economic behaviour under uncertainty. It highlights the importance of development policies that reduce volatility and improve predictability, alongside income-based interventions, in enabling households to convert resources into sustained wellbeing and long-term development gains.