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Income timing and liquidity constraints: Evidence from a randomized field experiment

Lasse Brune and Jason Kerwin ()

Journal of Development Economics, 2019, vol. 138, issue C, 294-308

Abstract: 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.

Keywords: Savings constraints; Credit constraints; Financial inclusion; Income timing (search for similar items in EconPapers)
JEL-codes: D14 J33 O12 O16 (search for similar items in EconPapers)
Date: 2019
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