Experimental Design Details
The experiment will be a mixture of a framed field experiment (part 1) and a field experiment (part 2).
Part 1: Effect of cash-in-hand on savings
One week before the session, potential participants receive an announcement letter, informing them about the possibility to take part in paid individual interviews that will earn at least 300 pesos. The session itself takes place during the weekly center meeting that all clients are supposed to attend. Volunteers will be privately surveyed one-on-one by a local interviewer using a tablet. The survey consists of three parts.
The first part (and the overall duration) is announced during the recruitment and includes questions regarding personal characteristics, the composition of the household and its financial situation. At the end of the first part, participants are asked whether they want to save (a part of) their participation fee in their personal savings account and if so, how much. Savings will be matched with 20% after one month to reduce the potential impact of present bias. The second part of the survey consists of an incentivized elicitation of risk and time preferences as well as loss aversion. The third part includes survey questions regarding savings behavior and financial literacy.
Two treatments are implemented in a 2x2 design: 'cash-in-hand' vs control and normal (300 pesos) vs surprise (500 pesos) participation fee. The 'cash-in-hand' treatment variation consists of paying the remuneration at the beginning of the first part or after the savings decision and is randomized on the individual level. Participants in the treatment will hold onto the cash during the first part. Based on endowment experiments regarding goods, it is expected that physical possession (Bushong et al. 2010) and the duration of 'ownership' (Strahilevitz and Loewenstein 1998) create an endowment effect w.r.t. the cash. Treated participants will thus have a harder time handing the money back to the interviewer who will give it to the loan officer supervising the center meeting after the entire interview is over. In contrast, participants in the control group will make the savings decision without holding the money in their hands, but knowing that they will receive the remainder of their participation fee just after the savings decision.
The amount of the participation fee will be randomized on borrower center (i.e. session) level and will only be announced after the recruitment to avoid selection effects. While the normal participation fee might already have entered the participants' budget, the 200 additional pesos in the surprise treatment should be treated as a true windfall gain.
Part 2: Labeling and reminder
At the very end of the experiment when all savings will have been deposited, all present members of the center will take part in a short survey regarding their weekly income and expenditures. The CONTROL group will then be released. In treated centers, individuals will receive a 'savings card' which they personalize by writing down their name on it. They are encouraged to take the card home and place it visibly in their living room, such that the card serves as a reminder to save (comparable to previous studies that remind participants to save, e.g. Karlan et al. 2016). To ensure everyone receives a card they really like, three different designs have been developed using extensive pre-testing. Each participant will be allowed to choose her favorite card. This is the pure REMINDER treatment.
In the LABEL treatment, participants also receive a savings card and they personalize it. In addition, they will be guided to find an individual income frontier beyond which income will be labeled as savings. Participants will be asked to think about their next week's expenses for different items which they need to cover with their income and are instructed to save all income above this threshold. By labeling ''excess'' income as savings, mental accounting might help participants to save more. Participants will note their personal frontier on the savings card and pens will be provided to change the frontier after the first week.
Comparing the REMINDER and LABEL treatments allows me to estimate the ITT of labeling and accounting.
Administrative data will be used to evaluate the effectiveness of the two cards and savings levels in control centers that did not receive any card. After one month, the research team will revisit the center to pay the match from the lab-in-the-field experiment. During this occasion, a small survey will be administered concerning the use of the cards as well as income and expenditure levels during the last week.