Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile

Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that the inability to save contributes to this indebtedness. Access to free savings accounts substantially decreases participants' propensity to use short-term credit. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer saving more when given the choice. Take-up patterns suggest that requests by others for participants to share their resources are a key obstacle to saving

Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 Chilean micro-entrepreneurs. The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.7-fold and the average savings balance almost doubles). In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants. A second experiment tests an alternative delivery mechanism and shows that effects of similar size can be achieved by holding people accountable through feedback text messages, without meetings or peer pressure

Impact evaluation methods in public economics : a brief introduction to randomized evaluations and comparison with other methods

Recent years have seen a large expansion in the use of rigorous impact evaluation techniques. Increasingly, public administrations are collaborating with academic economists and other quantitative social scientists to apply such rigorous methods to the study of public finance. These developments allow for more reliable measurements of the effects of different policy options on the behavioral responses of citizens, firm owners, or public officials. They can help decision makers in tax administrations, public procurement offices, and other public agencies design programs informed by well-founded evidence. This article provides an introductory overview of the most frequently used impact evaluation methods. It is aimed at facilitating communication and collaboration between practitioners and academics by introducing key vocabulary and concepts used in rigorous impact evaluation methods, starting with randomized controlled trials and comparing them with other methods ranging from simple pre–post analysis to difference-in-differences, matching estimations, and regression discontinuity designs

Structural and temporal patterns of the first global trading market

Little is known about the structural patterns and dynamics of the first global trading market (FGTM), which emerged during the sixteenth century as a result of the Iberian expansion, let alone how it compares to today's global financial markets. Here we build a representative network of the FGTM using information contained in 8725 (handwritten) Bills of Exchange from that time-which were (human) interpreted and digitalized into an online database. We show that the resulting temporal network exhibits a hierarchical, highly clustered and disassortative structure, with a power-law dependence on the connectivity that remains remarkably robust throughout the entire period investigated. Temporal analysis shows that, despite major turnovers in the number and nature of the links-suggesting fast adaptation in response to the geopolitical and financial turmoil experienced at the time-the overall characteristics of the FGTM remain robust and virtually unchanged. The methodology developed here demonstrates the possibility of building and analysing complex trading and finance networks originating from pre-statistical eras, enabling us to highlight the striking similarities between the structural patterns of financial networks separated by centuries in time.This research was supported by FCT-Portugal through grant nos FCT-TECH/0002/2007 (A.S.R. and A.P.), SFRH/BD/77389/2011 (F.L.P.), SFRH/BPD/76278/2011 (A.S.R.), PTDC/MAT-STA/3358/2014 (F.L.P., F.C.S. and J.M.P.), PTDC/EEI-SII/5081/2014 (F.L.P., F.C.S. and J.M.P.), UID/BIA/04050/2013 (J.M.P.) and UID/CEC/50021/2013 (F.C.S.), and by the European Science Foundation through grant no. DynCoopNet-06-TECT-FP-004 (A.S.R. and A.P.)

Savings accounts to borrow less: experimental evidence from Chile

Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. In a randomized field experiment with over 3,500 low-income micro-entrepreneurs in Chile, we find that providing access to free savings accounts decreases participants’ shortterm debt. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving

Saving more in groups: field experimental evidence from Chile

We test the impact of a peer group program on savings in a sample of microcredit clients. We conduct two randomized trials among these 2687 microcredit clients. The first finds that a Savings Group Treatment, which combines public goal setting, monitoring in the group and non-financial rewards, increases savings in a new savings account significantly. The number of deposits grows 3.7-fold and the average balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure. Given that participants are borrowing at 90% APR, we discuss how and when saving more could be harmful or beneficial

Saving more in groups: field experimental evidence from Chile

We test the impact of a peer group savings program on precautionary savings, through two randomized field experiments among 2,687 microcredit clients. The first experiment finds that the Peer Group Treatment, which combines public goal setting, monitoring in the group, and non-financial rewards, increases savings in a new savings account significantly. The number of deposits grows 3.7-fold, and the average savings balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure