Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device

Felipe Kast (), Stephan Meier () and Dina Pomeranz
Additional contact information
Felipe Kast: Pontificia Universidad Catolica de Chile
Stephan Meier: Columbia University

No 6311, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: While commitment devices such as defaults and direct deposits from wages have been found to be highly effective to increase savings, they are unavailable to the millions of people worldwide who not have a formal wage bill. Self-help peer groups are an alternative commitment device that is widespread and highly accessible, but there is little empirical evidence evaluating their effectiveness. We conduct two randomized field experiments among low-income micro-entrepreneurs in Chile. The first experiment finds that self-help peer groups are very potent at increasing savings. In contrast, a more classical measure, a substantially increased interest rate, has no effect on the vast majority of participants. A second experiment is designed to unbundle the key elements of peer groups as a commitment device, through the use of regular text messages. It finds that surprisingly, actual meetings and peer pressure do not seem to be crucial in making self-help peer groups an effective tool to encourage savings.

Keywords: peer pressure; commitment device; savings; field experiment (search for similar items in EconPapers)
JEL-codes: D03 D14 D91 O16 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2012-01
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

Published - revised version published as 'Saving More in Groups: Field Experimental Evidence from Chile' in: Journal of Development Economics, 2018, 133, 275-294.

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Working Paper: Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device (2012)
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