BICEPS/SSE Riga Research Seminar: Nudging or Gambling to Save? A Field Experiment on Savings Behaviour

We are happy to invite you to a BICEPS/SSE Riga research seminar, which will take place on Thursday, March 30, at 17:00 at SSE Riga, room 411.

We are delighted to welcome Andris Saulītis as the speaker. Andris is a Senior Researcher at the University of Latvia’s Institute of Philosophy and Sociology. He earned his PhD in sociology from the European University Institute in Florence, Italy. Andris Saulītis’ research centers on household financial behavior and experimental methodology.

Speaker: Andris Saulītis (Institute of Philosophy and Sociology, University of Latvia)

Title: Nudging or Gambling to Save? A Field Experiment on Savings Behaviour (co-authored with Lea Kroeger, Humboldt University of Berlin)

Time: Thursday, March 30, 17:00

Venue: SSE Riga, room 411

Abstract

This experimental study aims to investigate the effect of nudges and prize-linked savings (PLS) account and examine the external validity of laboratory experiments on savings behaviour. We employ a natural setting in collaboration with a professional survey company operating in Latvia and Estonia. The company recruits respondents on a daily basis to take part in commissioned surveys in return for a payment. While usually the payment to the individuals is done immediately after filling out a survey, the experimental design presented participants with a choice between immediate and delayed consumption of the money earned. The experimental design consisted of three experimental groups. In baseline offer, respondents were given the choice between receiving 10 euros immediately or depositing all or part of the amount in a virtual savings account for six months, with a maximum payout of 12 euros. In the social norm treatment, respondents were informed before the choice question that the survey focuses on household financial behaviour and that previous surveys revealed that the majority of respondents choose to save. The PLS account treatment offered individuals, who allocated all 10 euros to the savings account, to participate in a lottery with the chance to win an additional 5 euros on the top of the interest earned. The experimental results show that both social norm nudge and PLS account treatments tend to increase the number of individuals who decide to save. However, it is much lower than found in the laboratory experiments that have examined the effect of PLS accounts on savings behaviour. Both treatments resulted in approximately similar 8% points increase in the number of individuals who opted for savings. The introduction of the PLS account increased savings by 13%, while the social norm treatment increased it by 24%. At the same time, we identify several suggestive savings patterns that are in line with previous studies. First, individuals who play lotteries are more likely to invest in PLS, while non-lottery players are more responsive to social norms. Second, Estonians tend to save more often than Latvians, a trend that has been found in many empirical studies. Taken together, the results of this field experiment provide a more accurate representation of the true behaviour of individuals when it comes to savings and investment decisions. It also suggests that social norms can be as persuasive as financial incentives to increase the savings level.