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What are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka

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Listed:
  • Michael Callen
  • Suresh De Mel
  • Craig McIntosh
  • Christopher Woodruff

Abstract

The world’s poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labor effort in both self-employment and in the wage market. The results suggest that the labor allocation channel is an important mechanism linking savings opportunities to income.

Suggested Citation

  • Michael Callen & Suresh De Mel & Craig McIntosh & Christopher Woodruff, 2014. "What are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka," NBER Working Papers 20736, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20736
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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • 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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