Public Policy Working Group: Sean Higgins
"Debit Cards, Cash Transfers, and Savings: Evidence from Mexico"
PhD Candidate, Department of Economics
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About The Speaker
Sean Higgins is a PhD Candidate at Tulane’s Department of Economics and a Visiting Scholar at UC Berkeley’s Haas School of Business. His current research focuses on access to banking services for the poor in Mexico, where he spent the past academic year as a Fulbright Scholar and is launching a randomized control trial with the Mexican government to test various banking interventions for the poor. His other research interests include the effects of taxes and government transfers on poverty and inequality in developing countries; in this area, he has published in Public Finance Review and the Review of Income and Wealth and is Co-Principal Investigator on a Bill & Melinda Gates Foundation grant.
Abstract of the paper being presented
Little is known about the drivers of demand for savings products among the poor in low and middle income countries. In particular, the importance of non-monetary transaction costs and the role of trust in banks are not well-understood. We exploit a natural experiment: the gradual rollout of debit cards as the new payment method of Mexico’s Oportunidades—a cash transfer program that reaches nearly one-fourth of Mexican families—to urban recipients who were already receiving their transfers in bank accounts. Because debit cards can be used to access savings at any bank’s ATM, this change reduced non-monetary transaction costs. Using data on bank account balances from over 340,000 bank accounts of Oportunidades recipients over three years, we find that the marginal propensity to save does not increase for the first six months after receiving a debit card, then increases over time, reaching about 20% of transfer income (4% of total income) higher than that of the control group one year later. Suggestive evidence indicates that the increasing MPS over time is due to learning to trust the bank rather than learning to use the technology. Panel data on household consumption, income, and assets suggest that this is not substitution between forms of savings, but an increase in overall savings.
