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  • 2014
  • Working Paper
  • HBS Working Paper Series

Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile

By: Felipe Kast and Dina Pomeranz
  • Format:Print
  • | Language:English
  • | Pages:51
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Abstract

Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving.

Keywords

Saving; Poverty; Borrowing and Debt; Chile

Citation

Kast, Felipe, and Dina Pomeranz. "Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile." NBER Working Paper Series, No. 20239, June 2014. (Revision requested by Journal of Public Economics. Featured in La Tercera. Harvard Business School Working Paper, No. 14-001, July 2013)
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Related Work

    • 2014
    • Faculty Research

    Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile

    By: Felipe Kast and Dina Pomeranz
Related Work
  • Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile By: Felipe Kast and Dina Pomeranz
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