Saving more to borrow less
Subtitle: experimental evidence from access to formal savings accounts in Chile
By: Felipe Kast, Dina Pomeranz
Contributors: Pomeranz, Dina, author; Harvard Business School
Series: Working paper / Harvard Business School -- 14-001; Working paper (Harvard Business School) -- 14-001.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 50
Work titles: Do savings constraints lead to indebtedness?
Description: 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.
Notes: "June 2014. (Revised June 2014)."--Publisher's Web site.

Revision of Do savings constraints lead to indebtedness?

Includes bibliographical references (pages 29-33).