Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment

65 Pages Posted: 6 Oct 2015

See all articles by Leonardo Bursztyn

Leonardo Bursztyn

University of California, Los Angeles (UCLA) - Anderson School of Management

Stefano Fiorin

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area

Daniel Gottlieb

Washington University in St. Louis

Martin Kanz

World Bank; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2015

Abstract

We study the role of morality in debt repayment, using an experiment with the credit card customers of a large Islamic bank in Indonesia. In our main treatment, clients receive a text message stating that “non-repayment of debts by someone who is able to repay is an injustice.” This moral appeal decreases the share of delinquent customers by 4.4 percentage points from a baseline of 66 percent, and reduces default among the customers with the highest ex-ante credit risk. Additional treatments help benchmark the effects against those of direct financial incentives, understand the underlying mechanisms, and rule out competing explanations, such as reminder effects, priming religion, signaling the lender's commitment to debt collection, and provision of new information.

Suggested Citation

Bursztyn, Leonardo and Fiorin, Stefano and Gottlieb, Daniel and Kanz, Martin, Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment (October 2015). NBER Working Paper No. w21611. Available at SSRN: https://ssrn.com/abstract=2669800

Leonardo Bursztyn (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Stefano Fiorin

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area ( email )

110 Westwood Plaza
Box 951481
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/degrees/phd/phd-students/gem/fiorin

Daniel Gottlieb

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
St. Louis, MO MO 63130
United States

Martin Kanz

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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