Income Timing and Liquidity Constraints: Evidence from a Randomized Field Experiment.

ABSTRACT: People in developing countries sometimes desire deferred income streams, which replace more-frequent income flows with a single, later lump sum. We study the effects of short-term wage deferral using a randomized experiment with participants in a temporary cash-for-work program. Workers who are assigned to lump-sum payments are five percentage points more likely to purchase a high-return investment. We discuss the role of both barriers to saving and credit constraints in explaining our results. While stated preferences for deferred payments suggest a role for savings constraints, the evidence is also consistent with a simpler model of credit constraints alone.

SUBMITTER: Brune L 

PROVIDER: S-EPMC7785099 | biostudies-literature | 2019 May

REPOSITORIES: biostudies-literature