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Is it all about money? Field experiment with the defaulted in a debt-collector enterprise

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  • Andris Saulitis

Abstract

This paper examines the extent to which a noncompliant debtor can be induced to pay back the debt by sending a randomly assigned message via mobile phone and e-mail, ranging from a simple reminder to personalized messages and a social norm. In cooperation with a debt-collector enterprise in Latvia, the field experiment was carried out on 24,781 unique cases of consumer debts with unpaid liabilities, ranging from one to 40,060.26 euros. Overall, sending a message to a debtor increases compliance in comparison of not sending a message at all. However, messages, which include debtor's name, agent's name or social norm, do not increase compliance in comparison to a simple reminder message. I also looked at the interaction effect between the content of the message and the debt amount, which has been hardly examined in previous experiments on compliance. Messages with a debtor's name significantly increase compliance in comparison to a simple reminder among the debts smaller than 170 euros. However, such a message is counter-effective for debts larger than 1,340 euros, the same trend is true for a message with the social norm. Hence, a different policy needs to be applied to the debtors who are extensively overindebted in comparison to those with comparatively small debt amounts.

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  • Andris Saulitis, 2016. "Is it all about money? Field experiment with the defaulted in a debt-collector enterprise," Natural Field Experiments 00567, The Field Experiments Website.
    • Handle: RePEc:feb:natura:00567
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    References listed on IDEAS

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    2. Michael Hallsworth, 2014. "The use of field experiments to increase tax compliance," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(4), pages 658-679.
    3. Hallsworth, Michael & List, John A. & Metcalfe, Robert D. & Vlaev, Ivo, 2017. "The behavioralist as tax collector: Using natural field experiments to enhance tax compliance," Journal of Public Economics, Elsevier, vol. 148(C), pages 14-31.
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    5. Gerlinde Fellner & Rupert Sausgruber & Christian Traxler, 2013. "Testing Enforcement Strategies In The Field: Threat, Moral Appeal And Social Information," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 634-660, June.
    6. Benno Torgler, 2004. "Moral Suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland," CREMA Working Paper Series 2004-01, Center for Research in Economics, Management and the Arts (CREMA).
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