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Saving more in groups: Field experimental evidence from Chile

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  • Kast, Felipe
  • Meier, Stephan
  • Pomeranz, Dina

Abstract

We test the impact of a peer group program on savings in a sample of microcredit clients. We conduct two randomized trials among these 2687 microcredit clients. The first finds that a Savings Group Treatment, which combines public goal setting, monitoring in the group and non-financial rewards, increases savings in a new savings account significantly. The number of deposits grows 3.7-fold and the average balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure. Given that participants are borrowing at 90% APR, we discuss how and when saving more could be harmful or beneficial.

Suggested Citation

  • Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2018. "Saving more in groups: Field experimental evidence from Chile," Journal of Development Economics, Elsevier, vol. 133(C), pages 275-294.
  • Handle: RePEc:eee:deveco:v:133:y:2018:i:c:p:275-294
    DOI: 10.1016/j.jdeveco.2018.01.006
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    Cited by:

    1. repec:eee:deveco:v:139:y:2019:i:c:p:135-156 is not listed on IDEAS
    2. Robert Dur & Dimitry Fleming & Marten van Garderen & Max van Lent, 2019. "A Social Norm Nudge to Save More: A Field Experiment at a Retail Bank," Tinbergen Institute Discussion Papers 19-063/I, Tinbergen Institute.
    3. repec:eee:deveco:v:134:y:2018:i:c:p:443-466 is not listed on IDEAS

    More about this item

    Keywords

    Savings;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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