Savings Defaults and Payment Delays for Cash Transfers: Field Experimental Evidence from Malawi

52 Pages Posted: 9 Sep 2016

See all articles by Lasse Brune

Lasse Brune

Yale University - Economic Growth Center

Xavier Giné

World Bank - Development Research Group (DECRG)

Jessica Goldberg

University of Maryland, Department of Economics

Dean Yang

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Department of Economics

Date Written: August 31, 2016

Abstract

Financial products and transfer schemes are often designed to help individuals improve welfare by following through on intertemporal plans. This paper implements an artefactual field experiment in Malawi to test the ability of households to manage a cash windfall. This study varies whether 474 households receive a payment in cash or through direct deposit into pre-established accounts at a local bank. Payments are made immediately, with one day delay, or with eight days delay. Defaulting the payments into savings accounts leads to higher bank account balances, an effect that persists for several weeks. However, neither savings defaults nor payment delays affect the amount or composition of spending, suggesting that households manage cash effectively without the use of formal financial products.

Suggested Citation

Brune, Lasse and Gine, Xavier and Goldberg, Jessica and Yang, Dean, Savings Defaults and Payment Delays for Cash Transfers: Field Experimental Evidence from Malawi (August 31, 2016). World Bank Policy Research Working Paper No. 7807. Available at SSRN: https://ssrn.com/abstract=2836557

Lasse Brune (Contact Author)

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

Xavier Gine

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

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

HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Jessica Goldberg

University of Maryland, Department of Economics ( email )

College Park, MD 20742
United States

Dean Yang

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

440 Lorch Hall
611 Tappan Street
Ann Arbor, MI 48109
United States
734-764-6158 (Phone)

HOME PAGE: http://www.umich.edu/~deanyang/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Michigan at Ann Arbor - Department of Economics

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

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