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Field
Trial Title
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Before
Unlocking the Black Box of Savings
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After
How Important are Investment Indivisibilities for Development?
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Trial Status
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Before
completed
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After
on_going
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Field
Abstract
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Before
We estimate the extent to which low savings rates for many individuals can be explained by high returns to capital in their businesses or in businesses they would like to start. We also estimate the correlation between risk aversion and precautionary savings. In addition, we estimate the extent to which business owners may be more risk loving when they have a target good that they would like to purchase, because they have less use for intermediate levels of funds. We estimate the returns to capital for households of different risk aversion levels and with different patience levels, and combine this with information on their savings rates and borrowing rates at baseline.
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After
Theoretically, indivisible investments together with financial frictions can lower development, generate poverty traps, and lead agents to become risk-loving. Using experimental cash grants involving a choice between a safer, low payoff and a riskier, large payoff lottery, we find that 27 percent choose the riskier, larger lottery. Small grant winners invest in livestock and business inventory, while large grant winners invest in land, which exhibits high capital gains. Our quantitative model shows that the aggregate effects of financial deepening are sizable if the indivisible investment can be accumulated (e.g., capital) but not if it is in fixed supply (e.g., land).
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Trial End Date
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Before
September 01, 2017
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After
August 01, 2023
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Last Published
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Before
June 01, 2023 10:06 AM
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After
June 01, 2023 02:49 PM
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Field
Intervention (Public)
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Before
The intervention will allow households to choose between lotteries which randomize cash grants of varying size ($2 or $100 and $2 or $500) via mobile money to a primarily unbanked population in rural western Uganda. Returns to the cash grants will be calculated at endline.
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After
The intervention allowed primarily unbanked households in peri-urban and rural western Uganda to choose between a less risky and riskier lottery with a smaller and larger payout, respectively (50% chance of winning $100 versus a 10% chance of winning $485). Conditional on lottery choice, winning the payout was random. The control group, who did not win a lottery, received a $1 cash transfer. Both lottery winnings and the consolation transfer were allocated to study participants via mobile money.
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Intervention Start Date
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Before
March 13, 2017
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After
February 23, 2017
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Field
Intervention End Date
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Before
September 01, 2017
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After
April 29, 2017
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Field
Primary Outcomes (End Points)
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Before
Outcomes: (1) investment, (2) savings, (3) household income and labor provision, (4) household welfare, and (5) use of/engagement in financial services (see below for more detailed description of outcome construction)
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After
Outcome categories: (1) investment, in aggregate as well as disaggregated between lumpy and divisible agriculture/livestock and business investments, (2) land investment, in terms of land value and land quantity, (3) land use and land productivity, (4) savings, (5) household income and labor provision, in aggregate as well as disaggregated between agriculture/livestock and business income, (6) returns to the cash grants, (7) household consumption, and (8) use of/engagement in financial services (including outstanding credit, as well as formal versus informal sources of credit and savings)
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Field
Experimental Design (Public)
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Before
This study uses a randomized controlled trial design to understand how households react to an unanticipated (positive) shock to their wealth and how this relates to their time preferences and risk preferences. Households are given a choice between a lottery with a fixed probability of getting $100, or a smaller probability of getting $500. Moreover, they are given a choice between receiving the transfer tomorrow or receiving a somewhat larger amount one month later.
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After
This study uses a randomized controlled trial design to understand how households react to an unanticipated (positive) shock to their wealth and how this relates to their time preferences and risk preferences. Households are given a choice between a lottery with a 50% probability of getting $100, or a 10% probability of getting $485. Moreover, they are given a choice between receiving the transfer tomorrow or receiving a somewhat larger amount one month later.
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Field
Sample size (or number of clusters) by treatment arms
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Before
590 control households, 373 small ($100) grants, 85 large ($500) grants
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After
590 control households, 373 small ($100) grant winners, 85 large ($500) grant winners (over-sampled)
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