Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment
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 the share of delinquent customers by 4.4 percentage points from a baseline of 66 percent, and reduces default among the customers with the highest ex-ante credit risk. Additional treatments help benchmark the effects against those of direct financial incentives, understand the underlying mechanisms, and rule out competing explanations, such as reminder effects, priming religion, signaling the lender's commitment to debt collection, and provision of new information.
Previously circulated as "Moral Incentives: Experimental Evidence from Repayments of an Islamic Credit Card." We would like to thank Emily Breza, Michael Callen, Davide Cantoni, Eric Chaney, Shawn Cole, Ernesto Dal Bó, Stefano DellaVigna, Ruben Enikolopov, Ben Esty, Nicola Gennaioli, Xavier Giné, Paola Giuliano, Raji Jayaraman, Emir Kamenica, Asim Khwaja, Andrés Liberman, Adrien Matray, David McKenzie, Maria Petrova, Gautam Rao, Andrei Shleifer, Nico Voigtländer, RomainWacziarg, IvoWelch, Noam Yuchtman, and numerous seminar participants for helpful comments and suggestions. We are grateful to the UCLA Anderson Center for Global Management, the UCLA Anderson Price Center, and the World Bank for financial support. This study was approved by the UCLA and Washington University Institutional Review Boards, and registered in the American Economic Association Registry for randomized control trials under trial number AEARCTR-0000635. An earlier version of the paper was circulated under the title “Moral Incentives: Experimental Evidence from Repayments of an Islamic Credit Card.” The opinions expressed in this paper do not necessarily represent the views of the World Bank, its Executive Directors, the countries they represent, or the National Bureau of Economic Research.
Leonardo Bursztyn & Stefano Fiorin & Daniel Gottlieb & Martin Kanz, 2019. "Moral Incentives in Credit Card Debt Repayment: Evidence from a Field Experiment," Journal of Political Economy, vol 127(4), pages 1641-1683.