Performance in Government and Nonprofits
Strong Versus Weak Commitments to Save for Education in Uganda
Commitment devices that limit people’s behavior in the present, such as savings accounts with restrictions, may help them achieve long-term goals. In a working paper, economist and IPR associate Dean Karlan and Leigh Linden of the University of Texas at Austin test whether a strong versus a weaker commitment device helps Ugandan children and their families save, spend more on educational expenses, and achieve higher test scores. In coordination with a local non-profit, Private Education Development Network (PEDN), the researchers randomly assigned students in 136 primary schools to one of three groups to save for educational expenses: a strong commitment savings account where funds were available at the end of the term and could only be use on educational items with a voucher, a weak commitment savings account where funds could be withdrawn at the end of the term, but were available in cash to spend on anything, and a control group. At the end of each trimester, students could use their vouchers or cash to purchase school supplies at a fair. Halfway through the program, half of the parents in the treatment groups attended a workshop explaining the value of saving the money early enough to impact their child’s behavior. The other half attended the workshop too late to influence their behavior. The researchers find that when their parents attended the workshop, children save more under a weaker commitment savings account than a stricter commitment, and they spend the money on school supplies. Children in this group also had better academic scores, suggesting that financial constraints play an important role in academic outcomes.