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Mental Accounting and Savings Decisions of the Poor
Initial registration date
February 21, 2017
October 28, 2019 12:29 PM EDT
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University of Essex
Other Primary Investigator(s)
Additional Trial Information
Most of the poor receive their income in cash and they seem to readily spend it instead of saving some of it. Offering commitment devices to overcome present bias or sending reminders to tackle inattention and forgetfulness only seem to yield modest improvements. In particular, usage levels of formal savings account usually remain low. What if the act itself, depositing the cash into the account or handing it over to the loan officer is associated with non-monetary costs that prevents individuals from saving? Based on a literature that shows reduced spending levels when cash is the means of transaction, I hypothesize that a "cash-in-hand" effect also exists for savings, i.e. individuals become attached to their cash and are reluctant to 'give it away' to save it. I test this hypothesis in a framed field experiment with rural and semi-urban poor in the Philippines ruling out other explanations for undersavings (part 1). As this bias arises due to mental accounting, a small intervention additionally tries to change how participants think about the cash they could save (part 2).
Intervention Start Date
Intervention End Date
Primary Outcomes (end points)
Part 1: decision to save during the survey (amount saved)
Part 2: weekly savings deposits into personal savings account in week 1-4 after the intervention, savings balance on this account after week 4 (short run outcomes); reassessment of these outcomes after 6 month (medium rum outcomes)
Primary Outcomes (explanation)
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
The study consists of a framed field experiment (part 1) and a field experiment (part 2). The first part tests the 'cash-in-hand' effect on savings decisions. Participants take part in a paid individual survey and decide whether and if so, how much of their participation fee they want to save in their existing savings account. The treatment variation consists of receiving the participation fee at the very beginning of the survey, thus holding on to the cash when making the decision vs. receiving the remainder of the participation fee (everything that is not saved) directly after the savings decision. The second part of the study is a field experiment testing the effect of a combination of mental accounting and reminders on savings.
Experimental Design Details
Randomization will be done in STATA.
Part 1 will be randomized on the individual level (Cash-in-hand) and on the session level (participation fee amount).
Part 2 will be randomized on barangays (smallest administrative unit) to avoid confounding effects from very close centers.
Was the treatment clustered?
Sample size: planned number of clusters
Part 1: no cluster for cash-in-hand treatment, 30 clusters for participation fee treatment
Part 2: 20 barangays
Sample size: planned number of observations
Part 1: 300 individuals (microfianance clients)
Part 2: 871 individuals (if all active clients attend the meetings)
Sample size (or number of clusters) by treatment arms
- 75 individuals control and normal participation fee
- 75 individuals cash-in-hand and normal participation fee
- 75 individuals control and surprise participation fee
- 75 individuals cash-in-hand and surprise participation fee
- 3 barangays (100 individuals) CONTROL
- 10 barangays (447 individuals) REMINDER & LABEL
- 7 barangays (324 individuals) REMINDER
- all remaining barangays served by the three involved branches of the partner MFI serve as additional control (based on administrative data only)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
INSTITUTIONAL REVIEW BOARDS (IRBs)
Ethics Committee, Economics Department, LMU Munich
IRB Approval Date
IRB Approval Number