Insurance Through Savings Accounts: Evidence From A Randomized Field Experiment

Poverty is often characterized not only by low average income, but also by high variable income and expenditures, and a lack of access to insurance services that can help smooth consumption. Women are often especially vulnerable to such economic instability. This randomized field experiment among mostly female micro-entrepreneurs shows that access to a formal savings account can provide a vehicle for self-insurance that reduces the impact of economic difficulties. Since self-control is often a challenge when it comes to reaching ones savings goal, we investigate what mechanisms can help participants increase their savings. We find that follow-ups through self-help peer group meetings or through automatic text messages are highly effective tools to help those without access to formal commitment devices increase their precautionary savings.

Website:

Pages:

31

Author:

R. Abraham, F. Kast, D. Pomeranz

Date:

October 1, 2011

Media Type:

Report

Category:

Social Entrepreneurship