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

42 Pages Posted: 30 Aug 2018

See all articles by Leonardo Bursztyn

Leonardo Bursztyn

University of Chicago - Department of Economics

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: March 1, 2018

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 delinquency by 4.4 percentage points from a baseline of 66 percent, and reduces default among customers with the highest ex-ante credit risk. Additional treatments help benchmark the effects against direct financial incentives, and rule out competing explanations, such as reminder effects, priming religion, and provision of new information.

Keywords: Morality, Moral Suasion, Debt

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 (March 1, 2018). HKUST IEMS Working Paper No. 2018-55. Available at SSRN: https://ssrn.com/abstract=3237283 or http://dx.doi.org/10.2139/ssrn.3237283

Leonardo Bursztyn (Contact Author)

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
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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