Does Saving Cause Borrowing? / Paolina C. Medina, Michaela Pagel.

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Medina, Paolina C

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28956.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study whether savings nudges have the unintended consequence of additional borrowing in high-interest credit. We use data from a pre-registered experiment that encouraged 3.1 million bank customers to save via SMS messages and train a machine learning algorithm to predict individual-level treatment effects. We then focus on individuals who are predicted to save most in response to the intervention and hold credit card debt. We find that these individuals save 5.7% more (61.84 USD per month) but do not change their borrowing: for every additional dollar saved, we can rule out increases of more than two cents in interest expenses.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w28956 (Browse shelf(Opens below))	Not For Loan

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June 2021.

We study whether savings nudges have the unintended consequence of additional borrowing in high-interest credit. We use data from a pre-registered experiment that encouraged 3.1 million bank customers to save via SMS messages and train a machine learning algorithm to predict individual-level treatment effects. We then focus on individuals who are predicted to save most in response to the intervention and hold credit card debt. We find that these individuals save 5.7% more (61.84 USD per month) but do not change their borrowing: for every additional dollar saved, we can rule out increases of more than two cents in interest expenses.