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Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment

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  • Leonardo Bursztyn
  • Stefano Fiorin
  • Daniel Gottlieb
  • Martin Kanz

Abstract

We study the role of morality in debt repayment, using an experiment with the credit card customers of a large Islamic bank in Indonesia. In our main treatment, clients receive a text message stating that “non-repayment of debts by someone who is able to repay is an injustice.” This moral appeal decreases delinquency by 4.4 percentage points from a baseline of 66 percent and reduces default among customers with the highest ex ante credit risk. Additional treatments help benchmark the effects against direct financial incentives and rule out competing explanations, such as reminder effects, priming religion, and provision of new information.

Suggested Citation

  • Leonardo Bursztyn & Stefano Fiorin & Daniel Gottlieb & Martin Kanz, 2019. "Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1641-1683.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/701605
    DOI: 10.1086/701605
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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