Under-savers anonymous : evidence on self-help groups and peer pressure as a savings commitment device

Author / Creator

Kast, Felipe

Available as

Online

Summary

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile. The first expe...

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.5-fold and the average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.

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