Public vs. Private Mental Accounts: Experimental evidence from savings groups in Colombia

Job Market Paper

I designed and implemented a Randomized Controlled Trial to study whether relatively simple modifications to how a commitment savings product was framed and labeled could affect savings accumulations of low-income individuals in newly formed Village Savings and Loan Associations (VSLAs) in Colombia. Motivated by hypotheses from behavioral economics the experiment tests hypotheses that behavioral responses should vary depending on whether subjects create ‘mental savings accounts’ in private or public ways. Individuals in the private-labeling treatment groups were led to label their savings as earmarked for a particular purpose and to state savings accumulation targets, information which was shared only privately with a member of the research team. Individuals in the public-labeling treatment groups received the same intervention but were then asked to publicly reveal and announce their chosen goals to other members of their savings group. The average treatment effects of the public-labeling intervention are very strong and significant. Savings accumulations increased by an average of 35% and savings goals were 8.5% to 21.5% more likely to be reached in comparison to those untreated. Further explorations strongly suggests evidence of differentiated behavioral responses of individuals in the private-labeling treatment group: private commitment to a savings goal is more effective for individuals who, after random assignment but prior to the intervention, had been measured to be less constrained by economic circumstances and institutional barriers. The analysis and interpretation of results was enriched by mixed methods for data collection: households’ survey data, administrative records and qualitative data from focus groups discussions. (Project funded by Todas Cuentan, Research platform for financial inclusion and social protection, supported by Ford Foundation, Universidad de Chile, IDRC Canada, Fundacion Capital, FOMIN, IDB, IEP).

Trust building gameLabeling mental accountingLabeling savings accounts. Colombia. RCTLabeling savings accounts. Colombia. RCT


Evaluación de impacto del programa Grupos de Ahorro y Crédito de la Comunidad en Colombia (Impact Evaluation of the Village Savings and Loan Associations in Colombia)

Se diseñó una evaluación de impacto cuasi-experimental con el objetivo de medir el impacto sobre la calidad de vida y bienestar de los hogares pobres participantes en el programa de Grupos de la Comunidad; medir el cambio en el comportamiento frente al ahorro y el uso de servicios financieros; evaluar la efectividad del programa en en mejorar la capacidad de los hogares para manejar y acumular activos financieros que les permita generar ingresos, suavizar consumo y enfrentar choques inesperados de una mejor manera; y evaluar si los activos gestionados a través de los grupos de ahorro contribuyen al desarrollo de emprendimientos, negocios o actividades productivas generadoras de ingreso para los hogares.

We designed a quasi-experimental impact evaluation aiming to measure the impact on the improvement in quality of life and well-being of poor households participants in the program VSLA; measure changes in savings behavior of individuals; evaluate the effectiveness of the program to improve the ability of households to manage and accumulate financial assets that would generate income, consumption smoothing and face unexpected shocks in a better way; and assess whether the assets managed through savings groups contribute to the development of small enterprises, businesses or productive activities that generate income. (Project funded by Fomin – IDB).

VSLA Colombia purchase of stocks Impact evaluation VSLA ColombiaImpact evaluation VSLA Colombia


Social Capabilities Opening the Door for Savings and Entrepreneurship Among Children and Youth

(With Joanne Yoong, Robert Lensik and Nina Hansen)

This study proposes to run a Multi Site Cluster Randomized Controlled Trial to evaluate how different savings strategies as commitment devices affect social and financial attitudes, behavior and knowledge of children and youth that participate in Aflatoun and Aflateen programs in 6 provinces of China. The objective is to develop sustainable financial capabilities and build up social capital for children and youth to encourage planning for the future following two different savings mechanism. “Individual savings” encourage students saving and achieving financial goals privately or individually. “Saving together” supports students setting and committing to financial goals and financial plans publicly. The later encourages individual savings but also to organize a social fund for group projects. By using group savings and public commitments the study will be able to test how two different savings mechanisms combined with the social component of Aflatoun and Aflateen curricula generate changes in the behavior of children by building financial capabilities, improving resource planning and developing social capital. This may result in better opportunities for enterprise and business development among the youth in China. The results allow comparing the efficacy of financial and social education interventions in other countries and with different contexts. (Pilot funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation and managed by Innovations for Poverty Action. Expansion of the project funded by the Asian Development Bank – IPA Evaluation Grant).

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If Only I was Paid More Often: The Effects of Changing the Frequency of CCT Payments

(With Leandro Carvalho)

We will investigate whether changing how often Mas Familias en Accion (Colombia’s CCT) transfers are paid will enable the poor to better use and manage their money. Beneficiaries may avoid spending transfers upfront and exhausting them before the payment cycle’s end if they are paid in smaller more frequent payments. We will explore if households are paid in smaller more frequent payments, are better able to smooth consumption because can keep some of their income out of temptation’s way and facilitate planning (for a shorter time-horizon), possibly increasing savings and/or reducing borrowing. (Pilot project funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation and managed by Innovations for Poverty Action).

Familias en Accion. Vary frequency of payments. Colombia Familias en Accion. Vary frequency of payments. Colombia.


Testing the Impact of Financial Incentives in Inducing Sustainable Saving Behavior in Low Income Households: Evidence from a Field Experiment in Dominican Republic

(With Lucio Castro and Paula Szenkman)

An RCT aimed at evaluating the effectiveness of an innovative financial product combining a commitment savings account and a credit line with commitment letters and reminder messages (“La CajaLadrillo”) to encourage sustainable saving habit formation and investment in real assets in a low-income population of the Dominican Republic (DR). In the Dominican Republic (DR), 40% of the population is under the poverty line. Over 60% does not own a bank account and only 13% have access to formal credit. Moreover, 42% faces housing deficit; part of it could be addressed by self-construction of home improvements and new homes. Recent evidence suggests that poor households face significant administrative, informational and behavioral -such as inattention and self-control- barriers, restricting savings and access to formal financing. Existing studies also show that commitment saving accounts and reminders are effective at inducing saving. Yet, there is no evidence on how financial products combining commitment savings with financial incentives directed to a specific goal -e.g. purchasing real assets- may induce sustainable financial habits. We want to evaluate an innovative financial device combining commitment savings account with a credit line for the acquisition of constructions materials. (Pilot project funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation and managed by Innovations for Poverty Action).


Default Savings Deposits for Retail Clients

Assessing the viability of a product that allows consumers to automatically deposit a percentage of their expenditures into a savings account when shopping at participating retail stores.

We want to test the feasibility and marketability of a default deposit product that allows consumers to automatically deposit a share of their expenses at participating retail stores into a savings account. The pilot estimates the expected take-up rate of this savings account by consumers. It also assesses the feasibility of passing unrealized savings from value chain improvements on to the customer. (Pre-evaluation project funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation and managed by Innovations for Poverty Action).

Focus groups. Default savings accounts from grocery shopping. ColombiaDefault savings accounts from grocery shopping. RCT. Colombia. IPA. Luz SalasGFocales Cali - 06