Do savings constraints lead to indebtedness?
Subtitle: experimental evidence froma ccess to formal savings accounts in Chile
By: Felipe Kast, Dina Pomeranz
Contributors: Pomeranz, Dina; Harvard Business School
Series: Working paper / Harvard Business School -- 14-001; Working paper (Harvard Business School) -- 14-001
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston]
Language: eng
Number of pages: 47
Description: Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that the inability to save contributes to this indebtedness. Access to free savings accounts substantially decreases participants' propensity to use short-term credit. 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 saving more when given the choice. Take-up patterns suggest that requests by others for participants to share their resources are a key obstacle to saving.
Notes: "July 2013."--Publisher's Web site.

Includes bibliographical references (pages 29-33).