job market paper

Financial Technology Adoption

  • Abstract

    How do the supply and demand sides of the market respond to financial technology adoption? In this paper, I exploit a natural experiment that caused exogenous shocks to the adoption of a financial technology over time and space. Between 2009 and 2012, the Mexican government disbursed about one million debit cards to existing beneficiaries of its conditional cash transfer program. I combine administrative data on the debit card rollout with a rich collection of Mexican microdata on both consumers and retailers. The shock to debit card adoption has spillover effects on financial technology adoption on both sides of the market: small retailers adopt point-of-sale (POS) terminals to accept card payments, which leads other consumers to adopt cards. Specifically, the number of other consumers with debit cards increases by 21 percent. Richer consumers respond to corner stores' adoption of POS terminals by substituting 12 percent of their supermarket consumption to corner stores. Finally, I use microdata on store prices, store geocoordinates, and consumer choices across store types to estimate the consumer gains from the demand-side policy's effect on supply-side POS adoption.

  • Summary: World Bank Development Impact Blog


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

Comparing the Incidence of Taxes and Social Spending in Brazil and the United States (with Nora Lustig, Whitney Ruble, and Timothy M. Smeeding). Review of Income and Wealth 62, S22-46, 2016.

The Effects of Brazil’s Taxation and Social Spending on the Distribution of Household Income (with Claudiney Pereira). Public Finance Review 42, 346-67, 2014.

working papers

How Debit Cards Enable the Poor to Save More (with Pierre Bachas, Paul Gertler, and Enrique Seira). NBER Working Paper 23252.

  • Abstract

    While formal savings can have a number of positive impacts for the poor, savings and active account use remain low. We study an at-scale natural experiment in Mexico in which debit cards are rolled out to beneficiaries of a cash transfer program, who already received transfers directly deposited into a savings account. Using administrative account data and household surveys, we find that after two years with a card, beneficiaries accumulate a savings stock equal to 2 percent of annual income. This effect size is larger than the impact of other interventions studied in the savings literature. We show that the increase in formal savings appears to be an increase in overall savings, financed by a voluntary reduction in current consumption. Debit cards increase account usage and savings through two mechanisms: first, they reduce the transaction costs of accessing money in the account; second, they reduce monitoring costs, which leads beneficiaries to check their account balances frequently and build trust in the bank.

  • Summary: VoxDev

The Long-Term Effects of Temporary Incentives to Save: Evidence from a Prize-Linked Savings Field Experiment (with Paul Gertler, Aisling Scott, and Enrique Seira).

  • Abstract

    Despite the benefits of saving in formal financial institutions, take-up of no-fee formal savings accounts is low among the poor. Surprisingly, even after opening a savings account, use of the account is often low. In a large randomized experiment across 110 bank branches throughout Mexico, we provide a temporary incentive to both open and use a savings account: we offer prize-linked savings accounts with cash-prize lotteries, where lottery tickets are awarded as a function of savings balances. We find that 41% more accounts are opened in treatment branches than in control branches on average, and the number of accounts opened in treatment branches increases steadily over time while the lotteries were being offered. Although the incentive to save is temporary as lotteries are only offered for two months, the new accounts continue to be used over time. After five years, clients who opened accounts in response to the lottery continue saving and making transactions at the same rates as those who opened accounts in control branches during the same months.

work in progress

Bank Non-Secrecy: Taxation and Financial Service Use in Mexico (with Pierre Bachas and Anders Jensen). Draft coming soon.

  • Abstract

    Economies are increasingly becoming cashless. Since cash is an anonymous transaction technology, this trend presents an opportunity to reduce informal sector activities and increase tax compliance. Whether governments should encourage the transition towards cashless technologies depends on the elasticity of firms' behavior with respect to the price of cash. We combine panel data on over 300,000 bank clients with a natural experiment in Mexico which repealed a tax of 3% on cash deposits. We show that entrepreneurs and small firms increase cash usage by over 20% following the repeal of the tax. The effect stems primarily from substitution away from modern deposit methods (e.g., electronic and online deposits), with limited evidence of a small increase in total deposits. While the mix of cash versus modern deposit technologies is very elastic to relative prices, total deposits appear inelastic, suggesting limited tensions between governments' tax compliance objectives and financial inclusion.

  • Slides

Leveraging Government Transfers to Offer Low-Risk Microcredit in the Dominican Republic (with Frederico Finan, Seth Garz, and Paul Gertler). Randomization stage.

Digital Sales and Inventory Data to Assess Creditworthiness (with Paul Gertler, Ulrike Malmendier, and Waldo Ojeda). Pilot completed.

e-Payments (with Paul Gertler, Ulrike Malmendier, and Waldo Ojeda). Analysis of iZettle Mexico administrative data under way and randomization to begin soon.

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