Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile / Felipe Kast, Dina Pomeranz.

Format:

Book

Author/Creator:

Kast, Felipe.

Contributor:

National Bureau of Economic Research.

Pomeranz, Dina.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20239.

NBER working paper series no. w20239

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Saving More to Borrow Less

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving.

Notes:

Print version record

June 2014.