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Saving by Default: Evidence from a Field Experiment in Rural India
- Publication Year :
- 2015
-
Abstract
- Worldwide, people are gaining access to a formal bank account, which allows account-based instead of cash payments. Based on a novel randomized control trial, we document that the payment method is an important determinant of savings behavior. In rural India, we study the effect on savings of allocating identical weekly payments on a bank account (treated) or in cash (control). The treatment impact is huge: savings increase by 110% within three months, and the effect is long-lasting. Villagers paid in cash do not save more in other assets, but increase consumption. Therefore, we infer that being paid on a bank account has a net positive impact on total savings. When we twist the design and start paying everyone in cash, savings and consumption patterns no longer differ between the treated and control. We interpret these findings as the outcome of the default option, and shed light on six plausible underlying mechanisms.
- Subjects :
- Consumption (economics)
Cash transfers
jel:C93
Actuarial science
Randomized experiment
050204 development studies
media_common.quotation_subject
05 social sciences
Savings, Finance, Behavioral Economics
Monetary economics
Behavioral economics
Payment
jel:G21
jel:D14
jel:D03
Operating cash flow
Cash
0502 economics and business
Economics
jel:O16
050207 economics
General Economics, Econometrics and Finance
Savings account
media_common
Subjects
Details
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....352674aab8e27f6f4afac5b1a6c1d9ae