Working Paper | HBS Working Paper Series | 2012

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

by Felipe Kast, Stephan Meier and Dina Pomeranz

Abstract

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 micro-entrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (number of deposits grows 3.5-fold and average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.

Keywords: Saving; Decision Making; Interest Rates; Planning; Performance Effectiveness; Economics; Entrepreneurship; Growth and Development; Social Enterprise; Global Range; Chile;

Citation:

Kast, Felipe, Stephan Meier, and Dina Pomeranz. "Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device." Harvard Business School Working Paper, No. 12-060, January 2012. (Revised October 2012.)