How Debit Cards Enable the Poor to Save More (with Pierre Bachas, Paul Gertler, and Enrique Seira). Journal of Finance 76, 1913-1957, 2021.

  • Abstract

    We study an at-scale natural experiment in which debit cards were given to cash transfer recipients who already had a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulated a savings stock equal to 2% of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms. First, debit cards reduce transaction costs of accessing money. Second, they reduce monitoring costs, which led beneficiaries to check their account balances frequently and build trust in the bank.

  • Replication code
  • Summary: VoxDev
  • Media coverage: Kellogg Insight

Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion (with Pierre Bachas, Paul Gertler, and Enrique Seira). American Economic Association Papers & Proceedings 108, 444-448, 2018.

  • Abstract

    Debit cards reduce the travel distance to access bank accounts and can increase financial inclusion. We show that in Mexico, cash transfer beneficiaries who already received their transfers in bank accounts and subsequently received debit cards reduce their median distance to access the account from 4.8 to 1.3 kilometers. They also report being less likely to forgo important activities (childcare, work) to withdraw their transfers. Using account level data, we find a strong correlation between the reduction in travel distance and financial activity: beneficiaries facing the largest reductions in distance increase both their number of withdrawals and their savings balances.

  • Replication code: readme; zip
  • Summaries of AEA session I organized: CEGA; NYU Wagner’s Financial Access Initiative

Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor? (with Nora Lustig). Journal of Development Economics 122, 63-75, 2016.

  • Abstract

    To analyze anti-poverty policies in tandem with the taxes used to pay for them, comparisons of poverty before and after taxes and transfers are often used. We show that these comparisons, as well as measures of horizontal equity and progressivity, can fail to capture an important aspect: that a substantial proportion of the poor are made poorer (or non-poor made poor) by the tax and transfer system. We illustrate with data from seventeen developing countries: in fifteen, the fiscal system is poverty-reducing and progressive, but in ten of these at least one-quarter of the poor pay more in taxes than they receive in transfers. We call this fiscal impoverishment, and axiomatically derive a measure of its extent. An analogous measure of fiscal gains of the poor is also derived, and we show that changes in the poverty gap can be decomposed into our axiomatic measures of fiscal impoverishment and gains.

  • Replication code and data
  • Media coverage: Washington Post

working papers

Financial Technology Adoption. Revise and resubmit, American Economic Review.

  • Abstract

    Do coordination failures constrain financial technology adoption? Exploiting the Mexican government's rollout of one million debit cards to poor households from 2009--2012, I examine responses on both sides of the market, and find important spillovers and distributional impacts. On the supply side, small retail firms adopted point-of-sale terminals to accept card payments. On the demand side, this led to a 21% increase in other consumers' card adoption. The supply-side technology adoption response had positive effects on both richer consumers and small retail firms: richer consumers shifted 13% of their supermarket consumption to small retailers, whose sales and profits increased.

  • Summary: World Bank Development Impact Blog
  • Video: SFS Cavalcade (25 minute presentation, plus discussion and Q&A)
  • Media coverage: Kellogg Insight
  • Best Paper in Corporate Finance, SFS Cavalcade North America 2020
  • PBCSF Award for the Best Paper in Fintech, WFA 2020

Increasing Financial Inclusion and Attracting Deposits through Prize-Linked Savings (with Paul Gertler, Aisling Scott, and Enrique Seira).

  • Abstract

    Despite the benefits of saving in formal financial institutions, the take-up and use of savings accounts are low among the poor. In a randomized experiment across 110 bank branches throughout Mexico, an incentive to open and use a savings account—in which saving earned raffle tickets for cash prizes—caused a 41% increase in the number of accounts opened during the incentive months. Nearly all (96%) of new accounts were opened by previously unbanked households. The temporary two-month incentive had a persistent three-year impact on the flow of deposits at treatment branches. Prize-linked savings can thus benefit both previously-unbanked households and banks.

  • Summary: J-PAL
  • Video: IPA (25 minute presentation, plus discussion and Q&A)

Towards a Cashless Economy? Evidence from the Elasticity of Cash Deposits of Mexican Firms (with Pierre Bachas and Anders Jensen).

  • Abstract

    The transition from cash to traceable transaction technologies promises to reduce tax evasion and illegal flows. Should governments actively encourage this transition by making cash more costly to use? We study a policy in Mexico which sought to limit cash usage by taxing the flow of new cash deposited into bank accounts. Using the tax exemption threshold and firm level bank account data, we create variation in exposure to the tax based on firms' pre-tax intensity of cash reliance. We find that the flow of cash deposits is highly elastic to the tax rate: a 1% tax leads to a 60% reduction in cash deposits. This drop in cash deposits arises principally from a reduction in total bank deposits rather than substitution towards other transaction technologies. Thus policies which impact the cost of cash through banks have large efficiency costs and appear ineffective at accelerating the adoption of digital payments.

  • Slides

work in progress

Why are firms slow to adopt profitable business practices? (with Paul Gertler, Ulrike Malmendier, and Waldo Ojeda). Randomized controlled trial completed. Draft coming soon.

  • Abstract

    We explore the role of three behavioral biases—present bias, limited memory, and overconfidence about memory—in explaining why firms are often slow to adopt profitable business practices. In partnership with a financial technology (FinTech) company in Mexico, we randomly offer businesses that are already users of the payment technology the opportunity to be charged a lower merchant fee for each payment they receive from customers. The median value of the fee reduction is 3% of profits. We randomly vary the size of the fee reduction, whether the firms face a deadline to accept the offer, whether they receive a reminder, and whether we tell them in advance that they will receive a reminder. We find that firms only procrastinate, and hence the deadline only has an effect, for lower-value offers. Reminders increase take-up of the lower fee by 15% regardless of the offer's value, and anticipated reminders by an additional 7%. We conduct a survey to understand mechanisms behind the significant additional effect of the anticipated reminder relative to the unanticipated reminder, and find that receiving a reminder from the FinTech company when they had already been told they would receive a reminder increases firms' perceptions of the offer's value.

  • RCT registration

Price Comparison Tools in Consumer Credit Markets (with Erik Berwart, Sheisha Kulkarni, and Santiago Truffa). Randomized controlled trial launched.

Gender-Differentiated Digital Credit Algorithms Using Machine Learning (with Joshua Blumenstock, Laura Chioda, and Paul Gertler).