Ideas to Action:

Independent research for global prosperity

Massachusetts Avenue Development Seminars

Encouraging Savings and Self-Insurance among Micro-entrepreneurs: Two Experiments from Chile

Wednesday, April 18, 2012 - 12:00pm to 1:00pm

Featuring
Dina Pomeranz
Assistant Professor of Business Administration
Harvard Business School

With Discussant
David Roodman
Senior Fellow
Center for Global Development

Poverty is often characterized not only by low average income, but also by highly variable income and expenditures, and by a lack of access to insurance services that can help smooth consumption. While commitment devices such as defaults and direct deposits from wages have been found to be highly effective in increasing savings, they are not available to the millions of people worldwide who work in the informal sector or as independent entrepreneurs, and who therefore do not have a formal wage bill. At this MADS, Dina Pomeranz will share the results of two randomized field experiments with 3,000 low-income micro- entrepreneurs in Chile. She finds that self-help peer groups can be a highly effective alternative commitment device to encourage savings, with participation in a peer group program increasing the number of deposits in formal savings accounts 3.5-fold and almost doubling the average savings balance. These results are particularly relevant in light of the findings of a previous study that illustrated access to savings accounts provided an effective means for self-insurance and protection against economic shocks.

*The Massachusetts Ave. Development Seminar (MADS) is a ten year-old research seminar series that brings some of the world’s leading development scholars to discuss their new research and ideas. The presentations meet an academic standard of quality and are at times technical, but retain a focus on a mixed audience of researchers and policymakers.

Wednesday, April 18, 2012
12:00pm to 1:00pm