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Cash in hand and savings decisions

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  • Spantig, Lisa

Abstract

Cash is an important means of transaction, generally assumed to be fungible. However, behavioral economics and consumer research show that ‘cash in hand’, physically holding on to cash and then handing it away, affects purchasing decisions. I study how cash in hand influences decisions in a different, but very important domain: savings. Savings accounts are a promising tool for reducing poverty, but the use of savings accounts is often puzzlingly low. Holding on to cash that needs to be physically deposited into a savings account may increase the psychological costs of saving. This study experimentally identifies the causal effect of cash in hand on savings deposits of female microfinance clients in the Philippines. In contrast to many laboratory and several field studies with similar interventions, I do not find reduced savings deposits due to cash in hand.

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  • Spantig, Lisa, 2021. "Cash in hand and savings decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1206-1220.
  • Handle: RePEc:eee:jeborg:v:188:y:2021:i:c:p:1206-1220
    DOI: 10.1016/j.jebo.2021.06.008
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    More about this item

    Keywords

    Cash; Savings; Field experiment; Individual choice;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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