The Psychology of Poverty: Cognitive, Identity, and Institutional Dynamics—An Integrative Approach in Global and Overseas Contexts

Abstract

The psychology of poverty has become a major field of research over the past decade, moving beyond deficit-based and individualizing explanations toward an understanding of poverty as a context that shapes cognition, identity, and social participation. This article provides an integrative narrative synthesis of research in cognitive, social, developmental, and institutional psychology. It brings together scarcity theory ( Mullainathan & Shafir, 2013 ), economic stress models ( Conger et al., 2010 ), research on poverty-related stigma ( Walker, 2014 ; Tyler, 2020 ), and studies of subjective poverty. Subjective poverty is understood as individuals’ perception of their own economic situation relative to others, regardless of their objective level of income. The article also conceptualizes psychological manifestations of poverty as adaptive responses, that is, functional psychological adjustments developed under persistent environmental constraints rather than indicators of individual deficits. La Réunion is used throughout the paper as an illustrative overseas case study, demonstrating how structural inequalities, insularity, and higher living costs may intensify well-established psychological mechanisms observed in international research. Within this perspective, institutional dynamics refer to the ways welfare systems, educational institutions, healthcare services, and labour-market organizations shape everyday experiences of poverty, influence access to resources, and affect psychological well-being. The article proposes an integrative framework combining cognitive, identity, and institutional dimensions and concludes by discussing implications for research, social policy, and professional practice aimed at reducing cognitive burden, strengthening dignity, and improving support for vulnerable populations in overseas contexts.