Using financial tips to guide debt repayment: Experimental evidence from low- and moderate-income tax filers

Olga Kondratjeva, Stephen P. Roll, Sam Bufe and Michal Grinstein-Weiss

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2021, vol. 90, issue C

Abstract: Tax filing in the U.S. often has substantial implications for the debt burdens of low- and moderate-income (LMI) households. The tax refund—often the largest payment LMI households receive in a year—provides these households with an opportunity to reduce their debt, while tax liabilities can lead them to take on additional debt. Though paying down debt is among the most common uses of the tax refund, households often do not optimally allocate their debt payments. We assess whether offering simple financial guidance can help households meet their debt obligations by administering a field experiment that provided debt management tips to LMI tax filers after tax filing. Four treatment groups saw one of four tips, while a fifth treatment group could select which of the four tips was best suited to their financial situation. Results from a follow-up survey found no effects of the intervention on reported rates of following the tips or on the amount of debt held. However, we do find that the tips reduced the incidence of holding unsecured debt by 5 percentage points (p<0.05). The primary drivers of these effects were tips advising participants to prioritize paying their smallest debt balance or their highest cost debt.

Keywords: Debt management; Unsecured debt; Field experiment; Financial tips; Behavioral economics; Tax refund (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2214804320300057
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:90:y:2021:i:c:s2214804320300057

DOI: 10.1016/j.socec.2020.101612

Access Statistics for this article

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) is currently edited by Pablo Brañas Garza

More articles in Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().