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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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    Cited by:

    1. Dupas, Pascaline & Keats, Anthony & Robinson, Jonathan, 2016. "The Effect of Savings Accounts on Interpersonal Financial Relationships: Evidence from a Field Experiment in Rural Kenya," Santa Cruz Department of Economics, Working Paper Series qt3524t5vb, Department of Economics, UC Santa Cruz.
    2. Flory, Jeffrey A., 2018. "Formal finance and informal safety nets of the poor: Evidence from a savings field experiment," Journal of Development Economics, Elsevier, vol. 135(C), pages 517-533.
    3. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2017. "How Debit Cards Enable the Poor to Save More," NBER Working Papers 23252, National Bureau of Economic Research, Inc.
    4. Pascaline Dupas & Dean Karlan & Jonathan Robinson & Diego Ubfal, 2018. "Banking the Unbanked? Evidence from Three Countries," American Economic Journal: Applied Economics, American Economic Association, vol. 10(2), pages 257-297, April.
    5. Pascaline Dupas & Anthony Keats & Jonathan Robinson, 2019. "The Effect of Savings Accounts on Interpersonal Financial Relationships: Evidence from a Field Experiment in Rural Kenya," Economic Journal, Royal Economic Society, vol. 129(617), pages 273-310.
    6. Blumenstock, Joshua & Callen, Michael & Ghani, Tarek, 2016. "Mobile-izing Savings with Automatic Contributions: Experimental Evidence on Present Bias and Default Effects in Afghanistan," CEPR Discussion Papers 11400, C.E.P.R. Discussion Papers.
    7. Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2018. "Saving more in groups: Field experimental evidence from Chile," Journal of Development Economics, Elsevier, vol. 133(C), pages 275-294.
    8. Simone Schaner, 2018. "The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor," American Economic Journal: Applied Economics, American Economic Association, vol. 10(3), pages 67-100, July.
    9. Joshua Blumenstock & Michael Callen & Tarek Ghani, 2018. "Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan," American Economic Review, American Economic Association, vol. 108(10), pages 2868-2901, October.
    10. Vincent Somville & Lore Vandewalle, 2017. "Access to Formal Banking and Household Finances: Experimental Evidence from India," CMI Working Papers 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
    11. Catia Batista & Pedro C. Vicente, 2018. "Is mobile money changing rural Africa? Evidence from a field experiment," NOVAFRICA Working Paper Series wp1805, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.
    12. Suresh de Mel & Craig McIntosh & Christopher Woodruff, 2013. "Deposit Collecting: Unbundling the Role of Frequency, Salience, and Habit Formation in Generating Savings," American Economic Review, American Economic Association, vol. 103(3), pages 387-392, May.
    13. Shilpa Aggarwal & Valentina Brailovskaya & Jonathan Robinson, 2020. "Saving for Multiple Financial Needs: Evidence from Lockboxes and Mobile Money in Malawi," NBER Working Papers 27035, National Bureau of Economic Research, Inc.
    14. Flory, Jeffrey A., 2014. "Banking the Poor: Evidence from a Savings Field Experiment in Malawi," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 171879, Agricultural and Applied Economics Association.

    More about this item

    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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