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Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

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Author Info
Nava Ashraf () (Harvard University)
Dean S. Karlan () (Yale University, Economic Growth Center)
Wesley Yin () (Princeton University)

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Abstract

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current tradeoffs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.

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Publisher Info
Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 917.

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Length: 40 pages
Date of creation: Jul 2005
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Handle: RePEc:egc:wpaper:917

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Related research
Keywords: Savings; commitment; hyperbolic preferences; microfinance; development economics; program evaluation; field experiment; self-control;

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
  2. Jesus Fernandez-Villaverde & Arijit Mukherji, 2003. "Can We Really Observe Hyperbolic Discounting," Levine's Working Paper Archive 618897000000000779, David K. Levine. [Downloadable!]
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  3. Anderson, S. & Baland, J.M., 2000. "The economics of roscas and intra-household resource allocation," Discussion Paper 83, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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