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The Disparate Effect of Nudges on Minority Groups

Author

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  • Maya Haran Rosen

    (Bank of Israel)

  • Orly Sade

Abstract

We use an experiment in Israel to compare the effect of short text messages sent via mobile phones on the actions of minority groups versus the general population regarding the “Savings for Every Child” program. Financial institutions and regulators are increasingly using digital text messages to raise awareness or encourage participation in programs and initiatives. We study the effect of these messages on individual behavior, and the size of this effect for different segments of the population. Our unique setting and proprietary data reveal that the text message had an overall positive effect, but a significantly smaller effect on minority groups. By combining our proprietary data with a dedicated survey, we provide additional insights on potential barriers (low digital literacy, low financial literacy, and low trust) that contribute to the differential effect. The research points to the importance of using specific measures that focus on minorities in order to raise the success of government initiatives.

Suggested Citation

  • Maya Haran Rosen & Orly Sade, 2021. "The Disparate Effect of Nudges on Minority Groups," Bank of Israel Working Papers 2021.21, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2021.21
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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