Income timing and liquidity constraints: Evidence from a randomized field experiment

Lasse Brune, Jason T. Kerwin*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)294-308
Number of pages15
JournalJournal of Development Economics
Volume138
DOIs
StatePublished - May 2019

Keywords

  • Credit constraints
  • Financial inclusion
  • Income timing
  • Savings constraints

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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