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Savings by and for the Poor: A Research Review and Agenda

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Listed:
  • Dean Karlan

    () (Economic Growth Center, Yale University)

  • Aishwarya Lakshmi Ratan

    () (Economic Growth Center, Yale University)

  • Jonathan Zinman

    () (Department of Economics, Dartmouth College)

Abstract

The poor can and do save, but often use formal or informal instruments that have high risk, high cost, and sub-optimal design. This could lead to undersaving compared to a world without market or behavioral frictions. Undersaving has important welfare consequences: variable consumption, low resilience to shocks, and foregone profitable investments. We lay out five sets of constraints that may hinder the adoption and effective usage of savings products and services by the poor: transaction costs, lack of trust and regulatory barriers, information and knowledge gaps, social constraints and behavioral biases. We discuss each in theory, and then summarize related empirical evidence, with a focus on recent field experiments. We then put forward key open areas for research and practice.

Suggested Citation

  • Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda," Working Papers 1027, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:1027
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    Keywords

    Savings; Randomized Evalutation; Poverty;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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