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Subsidies versus mental accounting nudges: Harnessing mobile payment systems to improve sanitation

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  • Lipscomb, Molly
  • Schechter, Laura

Abstract

The proliferation of mobile money across developing countries has led to an increase in availability of mobile payment systems. This decreases the organizational complexity of allowing more flexible payment terms for customers. We test whether subsidies, deposit requirements, and access to a mobile money savings vehicle increase the propensity of households to purchase an improved but more expensive sanitation service. While high subsidies increase purchases of the improved service, interventions inspired by mental accounting such as deposit requirements and earmarked savings accounts do not. The option to save in earmarked accounts using mobile money caused households to substitute away from purchasing the improved service in the general market and towards purchasing it through our providers, rather than substituting away from the unimproved service. We discuss implications for mental accounting-based policies compared to more traditional subsidies.

Suggested Citation

  • Lipscomb, Molly & Schechter, Laura, 2018. "Subsidies versus mental accounting nudges: Harnessing mobile payment systems to improve sanitation," Journal of Development Economics, Elsevier, vol. 135(C), pages 235-254.
    • Handle: RePEc:eee:deveco:v:135:y:2018:i:c:p:235-254
    DOI: 10.1016/j.jdeveco.2018.07.007
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    Cited by:

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    2. Augsburg, Britta & Caeyers, Bet & Giunti, Sara & Malde, Bansi & Smets, Susanna, 2023. "Labeled loans and human capital investments," Journal of Development Economics, Elsevier, vol. 162(C).
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    4. Revilla, Ma. Laarni D. & Qu, Fangqi & Seetharam, K E & Rao, Bhanoji, 2021. "“Sanitation” in the Top Development Journals: A Review," ADBI Working Papers 1253, Asian Development Bank Institute.
    5. Augsburg,Britta & Caeyers,Bet & Malde,Bansi Khimji, 2019. "Can Micro-Credit Support Public Health Subsidy Programs ?," Policy Research Working Paper Series 8846, The World Bank.
    6. Augsburg,Britta & Caeyers,Bet & Giunti,Sara & Malde,Bansi Khimji & Smets,Susanna, 2019. "Labelled Loans, Credit Constraints and Sanitation Investments," Policy Research Working Paper Series 8845, The World Bank.
    7. Acheampong, Alex O. & Opoku, Eric Evans Osei & Tetteh, Godsway Korku, 2024. "Unveiling the effect of income inequality on safe drinking water, sanitation and hygiene (WASH): Does financial inclusion matter?," World Development, Elsevier, vol. 178(C).
    8. Camille Boudot‐Reddy & Anita Mukherjee, 2021. "Improving the adoption of household health products: A sales experiment with chlorine tablets," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 623-641, March.
    9. Steinert, Janina Isabel & Vasumati Satish, Rucha & Stips, Felix & Vollmer, Sebastian, 2022. "Commitment or concealment? Impacts and use of a portable saving device: Evidence from a field experiment in urban India," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 367-398.
    10. d'Adda, Giovanna & Mahmud, Mahreen & Said, Farah & Bonan, Jacopo, 2020. "The Role of Flexibility and Planning in Repayment Discipline: Evidence from a Field Experiment on Pay-as-You-Go Off-Grid Electricity," RFF Working Paper Series 20-14, Resources for the Future.
    11. Pakhtigian, Emily L. & Pattanayak, Subhrendu K., 2024. "Social setting, gender, and preferences for improved sanitation: Evidence from experimental games in rural India," World Development, Elsevier, vol. 177(C).
    12. Emma Riley, 2024. "Resisting Social Pressure in the Household Using Mobile Money: Experimental Evidence on Microenterprise Investment in Uganda," American Economic Review, American Economic Association, vol. 114(5), pages 1415-1447, May.
    13. Jayash Paudel, 2023. "Challenges in water and sanitation services: Do natural disasters make matters worse?," Review of Development Economics, Wiley Blackwell, vol. 27(4), pages 2565-2582, November.
    14. Sania Ashraf & Cristina Bicchieri & Upasak Das. Alex Shpenev, 2023. "Valuing Open Defecation Free Surroundings: Experimental Evidence from a Norm-Based Intervention in India," Papers 2312.16205, arXiv.org.
    15. John Nana Francois & Johnson Kakeu & Cristelle Kouame, 2021. "Do Better Institutions Broaden Access To Sanitation In Sub‐Sahara Africa?," Contemporary Economic Policy, Western Economic Association International, vol. 39(2), pages 435-452, April.
    16. Choda, Amreen & Schoofs, Annekathrin & Verrinder, Noel, 2020. "Improving housing conditions: Labelled loans in Kenya and Uganda," Ruhr Economic Papers 878, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    Keywords

    Earmarking; Mental accounting; Mobile money; Sanitation; Savings; Subsidies;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy

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