Saving by Default: Evidence from a Field Experiment in Rural India
- (pp. 39-66)
(Complimentary)
Abstract
Access to banks is rapidly increasing worldwide, and allows account-based instead of cash transfers. We conduct a randomized experiment documenting the impact of the payment method on savings behavior. In India, we allocate identical weekly payments into a bank account (treated) or in cash (control). Savings in the account increase by 131 percent within three months, and the effect is long lasting. We also show that cash payments increase consumption and that—once everyone is paid in cash again—the saving patterns no longer differ. We interpret these findings as a default effect, and we further discuss plausible mechanisms.Citation
Somville, Vincent, and Lore Vandewalle. 2018. "Saving by Default: Evidence from a Field Experiment in Rural India." American Economic Journal: Applied Economics, 10 (3): 39-66. DOI: 10.1257/app.20160547Additional Materials
JEL Classification
- C93 Field Experiments
- D14 Household Saving; Personal Finance
- D90 Micro-Based Behavioral Economics: General
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- O12 Microeconomic Analyses of Economic Development
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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