Working Paper | HBS Working Paper Series | 2014

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 Chilean micro-entrepreneurs. The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.7-fold and the average savings balance almost doubles). In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants. A second experiment tests an alternative delivery mechanism and shows that effects of similar size can be achieved by holding people accountable through feedback text messages, without 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 June 2014. Featured by Time, Business Insider, Freakonomics, Wall Street Journal, Yahoo! Finance, and others.)