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Paper Abstract
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People in developing countries sometimes desire deferred income streams, which replace more-frequent income flows with a single, later lump sum. We study the effects of short-term wage deferral using a randomized experiment with participants in a temporary cash-for-work program. Workers who are assigned to lump-sum payments are five percentage points more likely to purchase a high-return investment. We discuss the role of both barriers to saving and credit constraints in explaining our results. While stated preferences for deferred payments suggest a role for savings constraints, the evidence is also consistent with a simpler model of credit constraints alone.
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Paper Citation
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Brune, L., & Kerwin, J. T. (2019). Income Timing and Liquidity Constraints: Evidence from a Randomized Field Experiment. Journal of Development Economics, 138, 294–308. https://doi.org/10.1016/j.jdeveco.2019.01.001
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Paper URL
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http://www.jasonkerwin.com/Papers/IncomeTiming/Brune_and_Kerwin_IncomeTiming_Latest.pdf
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https://doi.org/10.1016/j.jdeveco.2019.01.001
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