Private vs. Public Mental Accounts: Experimental Evidence from Savings Groups in Colombia

The Economics of Savings Groups

“…First, we discuss how SGs can avoid a coordination failure and achieve the Pareto‐preferred equilibrium by requiring each member to state the amounts he intends to borrow from and save with the group. This is in line with Salas (2014), who shows that requiring the members to state openly their savings goal increases the volume of lending and borrowing. Second, we propose allowing members to shift savings from periods close to share out, to earlier periods in the cycle.…”

“…We complement their analysis by studying how the groups operate once they form, abstracting away from the process of group's formation.4 The majority of study on SG look exclusively at end-of-cycle outcomes. To the best of our knowledge, the only exceptions are(Salas, 2014;Burlando and Canidio, 2016, 2017) who collect data on individual cumulative savings and borrowing at roughly four months intervals.5 This is consistent with the observation that group leaders have an impact on groups' outcomes even controlling for the group's observable characteristics (seeDeserranno et al, 2019).…”

“…Empirical evidence shows that these announcements are, indeed, beneficial. Salas (2014) randomly assigned groups to a treatment where members were encouraged to share their savings goals at the beginning of the cycle, a second treatment where those savings goals were kept private and a control. The public elicitation of savings goals increased savings by 35% over either the private elicitation or the control group (information on credit was not collected).…”