Do Opposites Detract? Intrahousehold Preference Heterogeneity and Inefficient Strategic Savings

To test whether differences in intrahousehold discount factors results in inefficient savings, sample couples were given the opportunity to open up to three bank accounts at the Family Bank in Kenya: a joint account, an individual account for the husband, and/or an individual account for the wife. Before the offer, each account was randomly assigned to qualify for one of four temporary, six-month interest rates. An individual account could bear 0, 2, 6, or 10 percent 6-month yields and joint accounts could bear 2, 6 or 10 percent 6-month interest rates. The interest rates were purposely chosen to exceed market rates by a large margin, with the hope that they would encourage account use and increase savings. After the six-month interest rate expired, researchers measured take-up, account use, savings behavior, and economic impacts for individual and joint account holders. Researchers measured the same outcomes again after another two and a half years to understand the long-term effects of the interest rate subsidies.

In order to test whether the ability to hide savings was an important driver of individual account use, 50 percent of participating couples were randomly selected for an "extra statements" offer. If a selected couple decided to open an individual account for (without loss of generality) spouse A , the enumerator processing the couple’s paperwork asked if the spouses would consent to allow spouse B to receive extra statement cards. The cards, if presented by spouse B at the bank, entitled him or her to learn the current balance of spouse A ’s account. These cards were only valid for 6 months, and were not given to couples unless both spouses gave their consent.

2009-05-01

2009-11-30

1) Account opening
2) Account savings

1) Account opening: Whether participants opened individual or joint accounts
2) Account savings: how much savings were accumulated
The data is collected from baseline survey and bank administrative data.

The study was conducted in the town of Busia in Western Province, Kenya with communities surrounding the Family Bank in Busia. Communities around the town’s 19 primary schools were chosen so that the school could serve as a meeting place. Trained field officers issued meeting invitations to married couples where (i) neither spouse had an account with Family Bank, but at least one spouse was potentially interested in opening one; and (ii) both spouses had national ID cards and were able to attend the meeting.

Couples who attended the meeting were given the offer to open one of three account types with the special six-month interest rate. The minimum operating balance of 100 Ksh was provided by the researcher making opening the account costless. A baseline survey was administered where the interest rate was randomly assigned by couples drawing envelopes. At the baseline survey, the degree of time preference was elicited using choices between different amounts of money at different times, as opposed to different amounts of goods at different times.

Couples were randomly allocated the interest rates and extra statements. Respondents drew envelopes containing cards with the interest rates from tins. The color of the joint interest rate card determined whether or not a couple was selected for extra statements.

Individual interest rates were randomized at the individual level, joint interest rates and extra statements were randomized at the couple level.

No

Study not clustered

598 married couples

Husband's interest rate: 0%=161, 2%=153, 6%=145, 10%=139
Wife's interest rate: 0%=138, 2%=159, 6%=158, 10%=143
Joint interest rate: 2%=195, 6%=212, 10%=191
Extra statements: No/Control=370, Yes=228

Preanalysis Readme

Preanalysis Document

DO OPPOSITES DETRACT? INTRAHOUSEHOLD PREFERENCE HETEROGENEITY AND INEFFICIENT STRATEGIC SAVINGS

This paper uses a field experiment to test whether intrahousehold heterogeneity in discount factors leads to inefficient strategic savings behavior. I gave married couples in rural Kenya the opportunity to open both joint and individual bank accounts at randomly assigned interest rates. I also directly elicited discount factors for all individuals in the experiment. Couples who are well matched on discount factors are less likely to use costly individual accounts and respond robustly to relative rates of return between accounts, while their poorly matched peers do not. Consequently, poorly matched couples forgo significantly more interest earnings on their savings.

Schaner, Simone. 2015. "Do Opposites Detract? Intrahousehold Preference Heterogeneity and Inefficient Strategic Savings." American Economic Journal: Applied Economics 7(2): 135–174.

https://www.povertyactionlab.org/sites/default/files/publications/732%20Opposites%20Attract%20AEJ.pdf