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

Jean N. Lee, Jonathan Morduch, Saravana Ravindran, Abu S. Shonchoy

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
Pages (from-to)675-688
Number of pages14
JournalJournal of Economic Behavior and Organization
Volume221
DOIs
StatePublished - May 2024

Keywords

  • Digital finance
  • Earmarks
  • Payment effect
  • Social meaning of money
  • Willingness to pay

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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