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

By Felipe Kast, Stephan Meier, Dina Pomeranz. Social Science Research Network, 2012

195 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/70249b98821aa1b9b911001472428d5d370b80b9

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Citations in the corpus

The foundations of financial inclusion : understanding ownership and use of formal accounts (2012, unknown): “…following a randomized controlled trial (RCTs) methodology, have examined the impact of commitment devices (Ashraf et al., 2006), reminders (Karlan et al., 2010), temporary saving subsidies (Schaner, 2013), and peer pressure (Kast et al., 2012) as some of the ways to promote the use of accounts.”
Social Networks, Reputation, and Commitment: Evidence From a Savings Monitors Experiment (2019, background): “…a bond; or (d) reference-dependent preferences (“keeping up with the Joneses”) (see Jack and Suri (2014), Cai et al. (2013), Bryan et al. (2012), Kast et al. (2012), Beaman et al. (2014), Beshears et al. (2015), Munshi (2014), Karlan et al. (2010), Bursztyn et al. (2013), Banerjee et al.…”
Peer effects in risk taking: Envy or conformity? (2015, background): “, 2012), savings decisions (e.g., Duflo and Saez, 2002; Kast et al., 2012) as well as different teenager (risky) behaviors (for an overview, see Sacerdote, 2011).”
Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province (2015, background): “Other recent papers have shown how prompting people to save (Atkinson et al., 2010) or providing people with reminders to save can also be quite effective (Kast et al 2010; Karlan et al. 2011).”
The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor (2018, result): “results, other studies that consider more market-oriented ranges of interest subsidies (up to 5 percent per year), find little to no impact on savings behavior (Karlan and Zinman 2013; Kast et al. 2012).”
The Nature and Origins of Misperceptions: Understanding False and Unsupported Beliefs About Politics (2017, background): “We know that humans are heavily inﬂuenced by their peers and social contacts (e.g., Bollinger & Gillingham, 2012; Bond et al., 2012; Gerber, Green, & Larimer, 2008; Gerber & Rogers, 2009; Kast, Meier, & Pomeranz, 2012; Meer, 2011; Paluck, 2011; Paluck & Shep-herd, 2012).”
Rank And Response: A Field Experiment On Peer Information And Water Use Behavior (2017, background): “…information can alter behavior in a variety of contexts, including energy conservation, voting, and savings (Allcott, 2011; Gerber et al., 2008; Kast et al., 2012; Beshears et al., 2014).1 Most interventions have provided individuals with information on the average performance of a broader…”
The Economic Importance of Financial Literacy: Theory and Evidence (2014, unknown): “Kast, Meier, and Pomeranz (2012) also found that self-help peer groups and text messaging boosted employee saving patterns in Chile.”
Psychological characteristics and household savings behavior: The importance of accounting for latent heterogeneity (2018, background): “A study by Kast et al. (2012) on the effectiveness of self-help groups and peer pressure as commitment devices for precautionary savings suggests that especially the social dimension of such commitment devices are effective in increasing savings.”
BANKING THE POOR VIA SAVINGS ACCOUNTS: EVIDENCE FROM A FIELD EXPERIMENT ∗ (2015, background): “31 Previous research has shown that reminders, via text messages or self-help group meetings, have a positive effect on savings (Karlan et al., 2012; Kast et al., 2011).”
The Cost of Convenience? (2017, unknown): “For time inconsistency and peer monitoring see Kast, Meier, and Pomeranz (2013).”
Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi (2015, background): “Because the raffle itself could provide an incentive to save or could serve as a reminder to save ðKast, Meier, and Pomeranz 2012; Karlan et al., forthcomingÞ, one-third of clubs assigned to either ordinary or commitment savings accounts were randomly determined to be ineligible to receive raffle…”