Topic:Pay Me Later:A Simple Employer-based SavingsScheme
Speaker:Jason Kerwin, University of Minnesota
Time:Tuesday,March 6, 13:30-15:00p.m
Place:Room217, Guanghua Building 2
For workers in developing countries with frequent paydays, purchasing durable goods is often made difficult by a lack of good savings options. We study a no-frills employer-based savings technology that piggybacks on existing payroll infrastructure to provide a safe and convenient method to save up for lumpy expenditures. Partnering with an agricultural employer in Malawi we offer workers the opportunity to defer part of their wages over a period of three months, at zero interest, to receive a lump sum payout at the end of the main season. We find that this savings scheme has high take-up, and participants save 14% of their earnings during the deferral period. Participating in the scheme causes a 24% net increase in total savings, despite some substitution away from informal savings methods. Treatment workers also increase output at work by 4.5% during the deduction period.
The increased savings lead to large increases in asset accumulation: asset ownership four months after he payout rise 0.13 SDs as a result of the treatment. Interest in repeat participation is high: 78% of treatment-group workers sign up for the product again for the following season. An incentivized choice experiment shows that payout of savings in one lump sum as well as limited access during the accumulation period are desirable features for the vast majority of participants.
Jason Kerwin is a development economist based in the Department of Applied Economics at the University of Minnesota, where he is an assistant professor. He received his Ph.D. in Economics from the University of Michigan, where he was also an Economic Demography Trainee at Michigan’s Population Studies Center. His research focuses on understanding the choices people in sub-Saharan Africa make about their health, their education, and their employment, with a specific focus on rural Malawi and Uganda. His work has been featured on the World Bank's Development Impact Blog and NPR's Morning Edition.
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