Abstract

http://ssrn.com/abstract=2451036
 


 



Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile


Felipe Kast


Pontifical Catholic University of Chile

Dina Pomeranz


Harvard Business School

June 12, 2014

Harvard Business School Entrepreneurial Management Working Paper No. 14-001

Abstract:     
Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving.

Number of Pages in PDF File: 51

JEL Classification: D14, D91, G22, O16

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Date posted: June 16, 2014  

Suggested Citation

Kast, Felipe and Pomeranz, Dina, Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile (June 12, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 14-001. Available at SSRN: http://ssrn.com/abstract=2451036 or http://dx.doi.org/10.2139/ssrn.2451036

Contact Information

Felipe Kast
Pontifical Catholic University of Chile ( email )
Ave. Vicuna Mackenna 4860, Macul
Santiago
Chile
Dina Pomeranz (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
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