Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment

42 Pages Posted: 1 Aug 2019

See all articles by Leonardo Bursztyn

Leonardo Bursztyn

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Stefano Fiorin

University of California, San Diego (UCSD) - UC San Diego

Daniel Gottlieb

Washington University in St. Louis

Martin Kanz

World Bank; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

We study the role of morality in debt repayment, using an experiment with the credit card customers of a large Islamic bank in Indonesia. In our main treatment, clients receive a text message stating that “non-repayment of debts by someone who is able to repay is an injustice." This moral appeal decreases delinquency by 4.4 percentage points from a baseline of 66 percent and reduces default among customers with the highest ex-ante credit risk. Additional treatments help benchmark the effects against direct financial incentives and rule out competing explanations, such as reminder effects, priming religion, and provision of new information.

Keywords: Morality, Moral Suasion, Debt

JEL Classification: C93, D14, G21, Z10, Z12

Suggested Citation

Bursztyn, Leonardo and Fiorin, Stefano and Gottlieb, Daniel and Kanz, Martin, Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment (March 2018). HKUST IEMS Working Paper No. 2018-55, Available at SSRN: https://ssrn.com/abstract=3430272 or http://dx.doi.org/10.2139/ssrn.3430272

Leonardo Bursztyn (Contact Author)

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Stefano Fiorin

University of California, San Diego (UCSD) - UC San Diego ( email )

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Daniel Gottlieb

Washington University in St. Louis ( email )

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Martin Kanz

World Bank ( email )

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World Bank - Development Research Group (DECRG)

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Washington, DC 20433
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