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Field
Abstract
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Before
Financial market frictions and behavioral constraints leave many in developing countries struggling to save sufficient funds to purchase durable goods, make profitable investments, or smooth consumption across the year. Savings constraints prevent individuals from making basic investments such as upgrading their dwellings with iron sheet roofs, paying for school fees or having better food options during low income seasons.
Barriers to saving may also have an important negative impact on individuals by depressing labor supply. If smaller income streams cannot be easily saved and aggregated to invest in goods and services that people value, this lowers the effective returns from working. Similarly, if funds cannot be easily transferred from high earning potential periods to low earnings potential periods, this reduces the incentives to work during the high earning potential periods.
One method for saving up larger sums is to defer receipt of income, a form of commitment savings that is surprisingly popular in developing countries. While there is demand for deferred payment in developing countries, this topic has been relatively understudied. Deferred payment is a particular form of commitment savings that merits study because it does not rely on access to bank services.
We study how allowing agricultural workers to defer payment of a portion of their wages to the end of the season affects financial behavior and labor supply. By reducing constraints to saving up large sums, deferred payment should reduce contemporaneous consumption and increase spending and investment that occurs after the payment has been received. In addition, deferred payments may increase the returns to working because deferred pay can be used to purchase sufficiently expensive goods or smooth future consumption.
Our study design will also allow us to shed light on the impact of mobile money on worker outcomes by adding experimental variation of offers to part of regularly scheduled two-weekly payments into mobile money wallets.
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After
Financial market frictions and behavioral constraints leave many in developing countries struggling to save sufficient funds to purchase durable goods, make profitable investments, or smooth consumption across the year. Savings constraints prevent individuals from making basic investments such as upgrading their dwellings with iron sheet roofs, paying for school fees or having better food options during low income seasons.
Barriers to saving may also have an important negative impact on individuals by depressing labor supply. If smaller income streams cannot be easily saved and aggregated to invest in goods and services that people value, this lowers the effective returns from working. Similarly, if funds cannot be easily transferred from high earning potential periods to low earnings potential periods, this reduces the incentives to work during the high earning potential periods.
One method for saving up larger sums is to defer receipt of income, a form of commitment savings that is surprisingly popular in developing countries. While there is demand for deferred payment in developing countries, this topic has been relatively understudied. Deferred payment is a particular form of commitment savings that merits study because it does not rely on access to bank services.
We study how allowing agricultural workers to defer payment of a portion of their wages to the end of the season affects financial behavior and labor supply. By reducing constraints to saving up large sums, deferred payment should reduce contemporaneous consumption and increase spending and investment that occurs after the payment has been received. In addition, deferred payments may increase the returns to working because deferred pay can be used to purchase sufficiently expensive goods or smooth future consumption.
Our original study design also would have allowed us to shed light on the impact of mobile money on worker outcomes by adding experimental variation of offers to part of regularly scheduled two-weekly payments into mobile money wallets. However, this part of the experiment never took place. Prior to the beginning of fieldwork (and thus also prior to randomization) the mobile money aspect of the project was canceled. We thus randomized workers into just two study arms: deferred wages and a control group. Our analysis plan documents posted to this trial registration have always reflected our actual design with only two study arms.
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Last Published
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Before
October 18, 2023 12:00 PM
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After
April 10, 2025 12:29 AM
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Field
Intervention (Public)
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Before
Intervention 1: partial deferral of regular wages to a later point in the main season when deferred wages are paid out in a lump sum
Intervention 2: partial contemporaneous deposit of regular wages into mobile money accounts
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After
Intervention 1: partial deferral of regular wages to a later point in the main season when deferred wages are paid out in a lump sum
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Field
Experimental Design (Public)
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Before
This study has two main parts. The first experiment examines the demand for, and effects of, deferred income payments. The second studies partial wage payments in mobile money. The design for each of these studies are outlined below:
Deferred Wages (DW): Workers are invited to attend information sessions on deferred wages before the main season begins. Research Assistants explain that the program allows workers to delay a portion of their fortnightly earnings to be received as one lump sum after the end of the deduction period when main season ends. Half of those interested will be randomly selected for an offer of deferred wages..
Mobile Money (MM): Members of a separate approximately 250 worker sample receive a basic mobile money startup package containing a SIM card with instructions and assistance on using mobile money. They will be invited to information sessions where they will learn about Mobile Money wage payments. The Mobile Money program allows workers to receive a portion of their fortnightly wages in mobile money rather than cash. Half of those who state interest will be randomize to receive the option for mobile money deposit.
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After
This study has two main parts. The first experiment examines the demand for, and effects of, deferred income payments. The second studies partial wage payments in mobile money. The design for each of these studies are outlined below:
Deferred Wages (DW): Workers are invited to attend information sessions on deferred wages before the main season begins. Research Assistants explain that the program allows workers to delay a portion of their fortnightly earnings to be received as one lump sum after the end of the deduction period when main season ends. Half of those interested will be randomly selected for an offer of deferred wages..
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Field
Sample size (or number of clusters) by treatment arms
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Before
Deferred Wages:
Take-up analysis sample: 1700 workers
approx 600 workers DW treatment
approx 600 workers DW control
Mobile Money:
approx 100 workers MM treatment
approx 100 workers MM control
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After
Deferred Wages:
Take-up analysis sample: 1700 workers
approx 600 workers DW treatment
approx 600 workers DW control
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Building on Existing Work
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Before
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After
No
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