Working Paper: NBER ID: w18417
Authors: Felipe Kast; Stephan Meier; Dina Pomeranz
Abstract: We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.5-fold and the average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.
Keywords: savings; self-help groups; peer pressure; commitment device; microfinance
JEL Codes: D00; D03; D11; D12; D14; E2; E20; E21; O2; O20; O54; Z18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Participation in self-help peer groups (C92) | Increases savings among micro-entrepreneurs (D14) |
| High-interest rate (5%) (E43) | Negligible effect on savings behavior (D14) |
| Regular feedback messages (Y70) | Increases savings (D14) |