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

I study whether modifications to the framing of a commitment savings product affects savings accumulations and other poverty-linked outcomes for low-income individuals in newly-formed Village Savings and Loan Associations (VSLAs) in Colombia. The experiment tests whether behavioral responses vary depending on whether subjects are led to label and create ‘mental savings accounts’ in private versus public ways. Individuals in the private labeling treatment stated accumulation targets and earmarked savings for a particular purpose, but this was shared only privately with a member of the research team. Individuals in the public labeling treatment received the same intervention but publicly revealed and announced their goals to other members of their savings group. The average treatment effect of the public-labeling intervention are very strong and significant. Savings accumulations increased by an average of 35% and savings goals were 8.5% more likely to be reached in comparison to those untreated. Further explorations strongly suggest evidence of differentiated behavioral responses of individuals in the private-labeling treatment group: private commitment to a savings goal is more effective for individuals who, after random assignment but prior to the intervention, were less constrained by extant economic circumstances and institutional barriers. The analysis and interpretation of results was enriched by mixed methods for data collection: households’ survey data, administrative records and qualitative data from focus groups discussions.