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The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor

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  • Simone Schaner

Abstract

I use a field experiment in rural Kenya to study how temporary incentives to save impact long-run economic outcomes. Study participants randomly selected to receive large temporary interest rates on an individual bank account had significantly more income and assets 2.5 years after the interest rates expired. These changes are much larger than the short-run impacts on experimental bank account use and almost entirely driven by growth in entrepreneurship. Temporary interest rates directed to joint bank accounts had no detectable long-run impacts on entrepreneurship or income, but increased investment in household public goods and spousal consensus over finances.

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  • Simone Schaner, 2016. "The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor," NBER Working Papers 22534, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22534
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    Cited by:

    1. 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.
    2. Kraay, Aart & McKenzie, David, 2014. "Do poverty traps exist ?," Policy Research Working Paper Series 6835, The World Bank.
    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. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    5. 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.
    6. Christina Gravert & Linus Olsson Collentine, 2019. "When nudges aren't enough: Incentives and habit formation in public transport usage," CEBI working paper series 19-10, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    7. Di Giannatale, Sonia & Roa, María José, 2017. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 8107, Inter-American Development Bank.
    8. 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.
    9. Karlan, Dean & Jamison, Julian & Zinman, Jonathan, 2014. "Financial Education and Access to Savings Accounts: Complements or Substitutes? Evidence from Ugandan Youth Clubs," Working Papers 132, Yale University, Department of Economics.
    10. Karlan, Dean & Zinman, Jonathan, 2018. "Price and control elasticities of demand for savings," Journal of Development Economics, Elsevier, vol. 130(C), pages 145-159.
    11. Campos,Francisco Moraes Leitao & Goldstein,Markus P. & Mckenzie,David J. & Campos,Francisco Moraes Leitao & Goldstein,Markus P. & Mckenzie,David J., 2015. "Short-term impacts of formalization assistance and a bank information session on business registration and access to finance in Malawi," Policy Research Working Paper Series 7183, The World Bank.
    12. Dean Karlan, Aishwarya Lakshmi Ratan, Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda-Working Paper 346," Working Papers 346, Center for Global Development.
    13. Walker, Sarah, 2020. "Historical legacies in savings: Evidence from Romania," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 76-99.
    14. 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.
    15. 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.
    16. Sonia Di Giannatale & María José Roa, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 97397, Inter-American Development Bank.
    17. Orazio Attanasio & Matthew Bird & Lina Cardona-Sosa & Pablo Lavado, 2019. "Freeing Financial Education via Tablets: Experimental Evidence from Colombia," NBER Working Papers 25929, National Bureau of Economic Research, Inc.
    18. Emily Breza & Arun G. Chandrasekhar, 2015. "Social Networks, Reputation and Commitment: Evidence from a Savings Monitors Experiment," NBER Working Papers 21169, National Bureau of Economic Research, Inc.

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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