TY  - GEN
AB  - 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.
AU  - Somville, Vincent
AU  - Vandewalle, Lore
CY  - Geneva
DA  - 2016
DA  - 2016
DO  - 10.71609/iheid-m423-1642
DO  - doi
ID  - 293930
L1  - https://repository.graduateinstitute.ch/record/293930/files/HEIDWP02-2016.pdf
L2  - https://repository.graduateinstitute.ch/record/293930/files/HEIDWP02-2016.pdf
L4  - https://repository.graduateinstitute.ch/record/293930/files/HEIDWP02-2016.pdf
LK  - https://repository.graduateinstitute.ch/record/293930/files/HEIDWP02-2016.pdf
N2  - 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.
PB  - The Graduate Institute of International and Development Studies
PP  - Geneva
PY  - 2016
PY  - 2016
T1  - Saving by default: evidence from a field experiment in Rural India
TI  - Saving by default: evidence from a field experiment in Rural India
UR  - https://repository.graduateinstitute.ch/record/293930/files/HEIDWP02-2016.pdf
Y1  - 2016
ER  -