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The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor

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  • Simone Schaner

Abstract

This paper uses a field experiment to test whether intrahousehold heterogeneity in discount factors leads to inefficient strategic savings behavior. I gave married couples in rural Kenya the opportunity to open both joint and individual bank accounts at randomly assigned interest rates. I also directly elicited discount factors for all individuals in the experiment. Couples who are well matched on discount factors are less likely to use costly individual accounts and respond robustly to relative rates of return between accounts, while their poorly-matched peers do not. Consequently, poorly-matched couples forgo significantly more interest earnings on their savings.

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  • Simone Schaner, 2018. "The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor," American Economic Journal: Applied Economics, American Economic Association, vol. 10(3), pages 67-100, July.
  • Handle: RePEc:aea:aejapp:v:10:y:2018:i:3:p:67-100
    Note: DOI: 10.1257/app.20170453
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    1. repec:eee:deveco:v:135:y:2018:i:c:p:517-533 is not listed on IDEAS
    2. Kraay, Aart & McKenzie, David, 2014. "Do poverty traps exist ?," Policy Research Working Paper Series 6835, The World Bank.
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    5. Jamison, Julian C. & Karlan, Dean S. & Zinman, Jonathan, 2014. "Financial Education and Access to Savings Accounts: Complements or Substitutes? Evidence from Ugandan Youth Clubs," CEPR Discussion Papers 9979, C.E.P.R. Discussion Papers.
    6. Vincent Somville & Lore Vandewalle, 2017. "Access to Formal Banking and Household Finances: Experimental Evidence from India," CMI Working Papers 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
    7. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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