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What are the headwaters of formal savings? Experimental evidence from Sri Lanka

Author

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  • Callen, Michael
  • De Mel, Suresh
  • McIntosh, Craig
  • Woodruff, Christopher

Abstract

The world's poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labour effort in both self-employment and in the wage market. The results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income.

Suggested Citation

  • Callen, Michael & De Mel, Suresh & McIntosh, Craig & Woodruff, Christopher, 2019. "What are the headwaters of formal savings? Experimental evidence from Sri Lanka," LSE Research Online Documents on Economics 103022, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:103022
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    Keywords

    savings; intertemporal labour supply; high-frequency surveys; household decision-making;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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