Because of social insurance and self-control. From a new working paper by Pascaline Dupas and Jonathan Robinson:
“Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health, reduce vulnerability to health shocks, and help people meet their savings goals. The two main barriers that keep people from saving on their own appear to be transfers to others and ‘unplanned expenditures’ on luxury items. Providing people with a designated safe place to keep money was sufficient to overcome these barriers for the majority of individuals, through a mental accounting effect. Adding an earmarking feature reduced savings for the average individual due to the associated liquidity cost and did not help present-biased people save more. For such individuals, stronger incentives to start and continue making deposits are necessary to overcome self-control problems.”
[…] Marc Bellemare’s blog pointed me to an interesting paper by Pascaline Dupas and Jonathan Robinson titled “Why Don’t the Poor Save More? Evidence from Health Savings Experiments.” It is an interesting paper, taking a page from the RCT4D literature to test some different tools for savings in four Kenyan villages. I’m not going to wade into the details of the paper or its findings here (they find some tools to be more effective than others at promoting savings for health expenditures), because they are not what really caught me about this paper. Instead, what struck me was the absence of a serious consideration of “the social” in the framing of the questions asked and the results. Dupas and Robinson expected three features to impact health savings: adequate storage facilities/technology, the ability to earmark funds, and the level of social commitment of the participant. The social context of savings (or, more accurately, barriers to savings) are treated in what I must say is a terribly dismissive way [emphases are mine]: […]