Pay Me Later: Savings Constraints and the Demand for Deferred Payments | Zendy

Lasse Brune | Zendy; Eric Chyn | Zendy; Jason Kerwin | Zendy

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Pay Me Later: Savings Constraints and the Demand for Deferred Payments

Author(s) -

Lasse Brune,

Eric Chyn,

Jason Kerwin

Publication year - 2021

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20191657

Subject(s) - receipt , deferral , economics , payment , scheme (mathematics) , popularity , labour economics , microeconomics , monetary economics , finance , mathematics , psychology , mathematical analysis , social psychology , accounting

We study a simple savings scheme that allows workers to defer receipt of part of their wages for three months at zero interest. The scheme significantly increases savings during the deferral period, leading to higher postdisbursement spending on lumpy goods. Two years later, after two additional rounds of the savings scheme, we find that treated workers have made permanent improvements to their homes. The popularity of the scheme implies a lack of good alternative savings options. The results of a follow-up experiment suggest that demand for the scheme is partly due to its ability to address self-control issues. (JEL D91, G51, J31, O12, O13)

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