Time preference and liquidity constraints: experimental evidence from Pakistan

Last registered on June 03, 2019

View Trial History

Pre-Trial

Trial Information

General Information

Title

Time preference and liquidity constraints: experimental evidence from Pakistan

RCT ID

AEARCTR-0001343

Initial registration date

June 13, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

June 13, 2016, 6:46 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated

June 03, 2019, 8:39 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

Pakistan

Region

Sargodha, Punjab

Primary Investigator

Name

Rachel Cassidy

Affiliation

World Bank

Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status

Completed

Start date

2016-03-14

End date

2018-12-31

Keywords

Finance & Microfinance

Additional Keywords

JEL code(s)

Secondary IDs

Abstract

The idea that many poor individuals are significantly present-biased has led to a proliferation of recent development interventions with commitment features, in particular commitment savings products (Ashraf, Karlan & Yin, 2006; John, 2015). Yet if individuals integrate background income into experimental decisions over time-dated monetary payments, then apparent measurement of ``present-bias'' may in fact reflect individuals' (correct or incorrect) anticipation that they will be less liquidity-constrained in the future. To experimentally test this hypothesis among a population which has been explicitly targeted for commitment products, I conduct a field experiment with female clients of a microfinance organisation in Pakistan. I randomly vary the timing of survey participation fees in order to induce exogenous variation in these individuals’ liquidity constraints, and examine whether and how this impacts individuals' measured rate of time preference and time-consistency.

External Link(s)

Registration Citation

Citation

Cassidy, Rachel. 2019. "Time preference and liquidity constraints: experimental evidence from Pakistan." AEA RCT Registry. June 03. https://doi.org/10.1257/rct.1343-4.0

Former Citation

Cassidy, Rachel. 2019. "Time preference and liquidity constraints: experimental evidence from Pakistan." AEA RCT Registry. June 03. https://www.socialscienceregistry.org/trials/1343/history/47396

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention (Hidden)

Intervention Start Date

2016-03-14

Intervention End Date

2016-05-28

Primary Outcomes

Primary Outcomes (end points)

Measures of time preference: near- and far- frame discount rates, stationarity, time-inconsistency, time-invariance (Halevy, 2015).

Primary Outcomes (explanation)

See pdf for detailed description of variable construction.

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

- I randomly vary the timing of survey participation fees in order to induce exogenous variation in individuals’ liquidity constraints, and examine whether and how this impacts individuals' measured rate of time preference and time-consistency. I consider both choices at baseline and revised choices at revisit, and control for measures of risk preferences and cognitive skills which could also potentially be affected by the participation fee treatment.
- I also experimentally manipulate the order of activities and near- versus far- frame to test for salience effects.
- Finally, I randomise the order in which villages are surveyed, such that I am able to exploit exogenous variation in whether individuals are surveyed before or after the onset of the wheat harvest (and its potential associated easing of liquidity constraints).

Experimental Design Details

Randomization Method

- Assignment to treatment arms was performed in office by a computer.
- Whether each respondent would receive a bonus participation fee was performed during the interview by drawing a ball from a bag.

Randomization Unit

- Randomisation into payment day and salience treatments was done at the individual level.
- Randomisation into village survey order was done at the village level (10 individuals were surveyed per village).

Was the treatment clustered?

Yes

Experiment Characteristics

Sample size: planned number of clusters

- Randomisation into payment day and salience treatments was done with all 530 individuals (who were spread across 53 villages).
- Randomisation into village survey order was done with a subset of 48 villages (5 villages were excluded from this treatment), implying 48 clusters of 10 individuals each.

Sample size: planned number of observations

530 individuals

Sample size (or number of clusters) by treatment arms

Individual-level treatment arms
The total sample of 530 individuals was cross-cut along the following three axes:
i) Paid at baseline - 263; paid at revisit - 267
ii) Salience - 252; control activities first - 278
iii) Near frame first - 259; far frame first - 271

Village-level treatment arms
A total sub-sample of 480 individuals were also randomised into a village-level treatment alongside their individual treatment status:
iv) Pre-harvest - 24 villages (240 individuals); Post-harvest - 24 villages (240 individuals)

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB