The impact of a “carry-around” soft commitment device on savings and temptation spending: Evidence from a field experiment in Indian slums

Treatment:
The proposed intervention, named “Aaj bachat kara, udya khush raha” (Marathi for “Save today, be happy tomorrow”), consists of a portable savings device (zip purse) that is provided in addition to a stationary savings box. It is thereby hypothesized that the carry-around savings device fulfils both a reminder and earmarking function that may invoke feelings of guilt and failure if money is spent on temptation goods.

The stationary device is a lockbox. Keys are distributed to the participant and his/her partner residing in the same housheold. The lock box can thus be opened at any time. Money thus retains its liquidity and can be accessed in urgent cases or emergencies. The intervention can therefore be conceived of as a “soft nudge” rather than a “hard” and fully coercive commitment.

Savings devices are distributed to participants during home visits. In these visits, participants are also encouraged to formulate a savings goal and commit to an individualized savings plan that outlines specific steps on how to reach their savings goal.

(Active) Control:
The control group receives only the stationary and not the portable savings device. Similar to the treatment group, the device is delivered in home visits and participants are asked to formulate both a savings goal and detailed savings plan.

2019-03-10

2019-04-30

1. Total Savings
2. Temptation Spending

1. Total Savings:
Includes savings held in the lockbox and also savings held elsewhere (e.g., bank account, savings group, post office). Enumerators will be instructed to physically count the money stored in the lockbox.
2. Temptation Spending
We introduce a new measure of temptation spending by capturing past as well as desired future consumption of nine selected food non-food items (e.g., alcohol, tobacco, gambling,...). Temptation goods are said to differ from “essential” goods in that they provide utility when consumed, but not in anticipation of their consumption. Based on this standard definition, we classify each of the selected items only as a ‘temptation good’ if the reported amount for past expenses exceeds the desired future amount. For each respondent, these divergences will then be added up into a total amount of past-month temptation expenditures. This approach allows us to define a unique set of temptation goods for each individual respondent, without reliance on a priori, researcher-defined temptation categories.
We further include a self-rated temptation index based on the following three items:
-In the past month, I spent money on things that I didn’t really need.
-In the past month, I bought something and later regret that I did.
-In the past month, I found it difficult to really control on how I spend my money

1. Self-Efficacy
2. Total Debt
3. Resilience to Economic Shocks Female Empowerment
4. Past-month Household Expenditures
5. Female Empowerment

1. Self-Efficacy
Items for the psychological concept of self-efficacy were drawn from the \emph{Internality, Powerful Others and Chance (IPC)} scale (Levenson, 1981) as well as from financial self-efficacy scales used previously in Steinert et al. (2018) and Lown (2011). Individual items will be aggregated into an index based on PCA.

2. Total Debts
In addition to total savings amounts, we will also capture outstanding debts in the past month.

3.Resilience to Emergenies:
Further to this, our survey will measure respondents’ capacity to cope with potential health or other emergencies. This will be determined based on whether participants have managed to cover the costs for potential medical treatment and medicine in the past month. We will further capture whether respondents have experienced some sort of income shock in the past six months and if so, how difficult it was for them to cope with this shock.

4. Past-month Household Expenditures
To assess the potential downstream impact of saving, we will also consider a more distal indicator of household welfare, namely past-month food and non-food expenditures.

5. Female Empowerment
Previous financial inclusion literature has routinely assessed program impacts on female empowerment. In line with this, we will measure female empowerment (for the female sample only) based on a PCA-weighted index composed of seven individual items.

1650 slum dwellers from the city of Pune, India, will be enrolled in the trial. 825 participants will be randomly allocated to the treatment group and 825 participants to the control group. Randomization will be stratified by participant sex, income, and present bias. Eligibility criteria are a) being 18 years and older, b) having some income (employment or other) at least once per week or on a monthly basis, and c) holding at least some decision making power over how money is spent. The study aims for a roughly equal share of female and male participants.

Randomization to treatment and control group will be done on a 1:1 ratio, implemented in Stata, stratified by participant sex, baseline savings, and present biased time preferences.

Individual Randomization

No

NA

1650

825 participants treatment, 825 participants control.

For desired power of 0.80 with two-tailed p<0.007 (for seven hypothesis tests) and a minimum detectable effect size of 0.37, the target sample size for the trial is 1500 individuals. We oversampled by 10% to account for attrition.

Pre-Analysis Plan

Pre-Analysis Plan