Supreet Kaur, PhD│CHIBE/BCFG Research Seminar

Speaker(s)

• 
  Supreet Kaur, PhD — Associate Professor of Economics, University of California, Berkeley

Event Description

Topic: “The Planning Fallacy and Savings Behavior: A Field Experiment on Seasonal Hunger”

Registration is required to attend this virtual seminar. To register, please visit:
https://upenn.zoom.us/meeting/register/tJUkduiqpzkuGN2th3OKyyw1muVfCd7CtCdn.

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Special thanks to our seminar co-sponsor, The Behavior Change for Good Initiative!

Abstract: Low income individuals often experience recurrent, predictable consumption cycles: with increases in spending when money first arrives, and decreases in spending and calorie intake in the days leading up to the next paycheck or income receipt. We empirically investigate the role of the “planning fallacy” in such cycles among Zambian farmers, who derive their income from one annual harvest and then spend it down over the course of the year. We document that individuals underestimate upcoming spending by 50%, creating scope for under-saving. To debias beliefs, we randomize an intervention that prompts individuals to think through their future expenses associatively in categories—without providing any external information or guidance.  Treated individuals increase “remembered” expenses by 42%; as predicted by the memory literature, effects are concentrated among small, irregular, and stochastic items. Immediate spending drops and, two months after the intervention, treated households hold 15% higher savings. They subsequently enter the “hungry season”—the final months of the year when consumption typically declines sharply—with one additional month of savings, leading to a flatter spending profile over the year. Households use the increased savings to self-finance additional farm investment, resulting in a 9% increase in the next year’s crop revenue. We replicate the intervention’s impact on beliefs among low-income Americans, suggesting the applicability of the planning fallacy to savings behavior across settings and populations.

Supreet Kaur, PhD, is an associate professor (with tenure) in the Department of Economics at UC Berkeley. She is a development economist, with overlap in her work with behavioral and labor economics. The first strand of her research focuses on the functioning of labor markets in poor countries. Dr. Kaur’s work documents frictions in labor markets, studies the causes of unemployment, and examines the impact of inequality on labor productivity. The second strand of her research explores how psychological forces–such as the limits of human cognition and social norms–can affect individual behavior and market equilibria. By applying insights from psychology into economics, Dr. Kaur’s goal is to deepen our understanding of the causes and consequences of poverty.

Organizer(s)