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The social meaning of mobile money: Earmarking reduces the willingness to spend in migrant households

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  • Lee, Jean N.
  • Morduch, Jonathan
  • Ravindran, Saravana
  • Shonchoy, Abu S.
Abstract
Behavioral household finance shows that people are often more willing to spend when using less tangible forms of money like debit cards or digital payments than when spending in cash. We show that this “payment effect” cannot be generalized to mobile money. We surveyed families in rural Northwest Bangladesh, where mobile money is mainly received from relatives working in factories. The surveys were embedded within an experiment that allows us to control for the relationships between senders and receivers of mobile money. The finding suggests that the source of funds matters, and mobile money is earmarked for particular purposes and thus less fungible than cash. In contrast to the expectation of greater spending, the willingness to spend in the rural sample was lower by 24 to 31 percent. In urban areas, where the sample does not receive remittances on net, there are no payment effects associated with mobile money.

Suggested Citation

  • Lee, Jean N. & Morduch, Jonathan & Ravindran, Saravana & Shonchoy, Abu S., 2024. "The social meaning of mobile money: Earmarking reduces the willingness to spend in migrant households," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 675-688.
    • Handle: RePEc:eee:jeborg:v:221:y:2024:i:c:p:675-688
    DOI: 10.1016/j.jebo.2024.04.023
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    More about this item

    Keywords

    Payment effect; Digital finance; Willingness to pay; Social meaning of money; Earmarks;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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