The impact of a “carry-around” soft commitment device on savings and temptation spending: Evidence from a field experiment in Indian slums

Abstract

We study the impact of a portable "soft" commitment device on the financial behavior of low-income slum dwellers in urban Pune, India. The portable device may add value to existing commitment designs by activating its binding appeal precisely at the point in time when spending decisions are made. 1650 individuals will be randomly allocated to receive either a zip purse and a lockbox (treatment arm) or a lockbox only (control arm). Both groups are asked to formulate a savings goal and commit to a step-by-step individualized savings plan. We will estimate the causal impact of receiving the portable device on total savings amounts and temptation spending. Further, we will compare study arms with regards to their borrowing activity, expenditure levels, resilience to economic shocks, financial self-efficacy, and female empowerment. Findings from this study can enhance the current understanding of how commitment devices may help alleviate behavioral biases and temptations.