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The Effects of Savings on Risk-Taking and Intertemporal Choice Behavior: Evidence from a Randomized Experiment

Authors:
Publication Date:
Jan 2013
Project Programs:
Behavioral Economics

We investigate whether saving affects risk-taking and intertemporal choices. A field experiment in Nepal randomized access to savings accounts among a population who mostly had never had one before, generating random variation in savings behavior. A year later we administered lottery-choice and intertemporal choice tasks. Our reduced-form results show the treatment is less risk averse and more willing to delay rewards. Combining the randomized variation with a structural model, we quantify the differences in the annual discount rate and the intertemporal elasticity of substitution. We provide suggestive evidence that the results are driven by preference changes rather than wealth effects.

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