Labeling exploits the concept of mental accounting—our model for sequencing and tracking outcomes in the future.
Labeling is a technique, related to commitment devices, for encouraging spending on investment goods with long-term benefits. It is often incorporated in savings or cash transfer programs.
- For example, locked savings boxes that are labeled (mentally) as “savings for health expenses” have increased women’s investment in preventive health in rural Kenya (Dupas & Robinson, 2013).
- In Bolivia and the Philippines, mobile text message reminders to save money emphasizing a specific goal or purchase were twice as effective in increasing savings rates compared to more general reminders (Karlan et al., 2010).
CCTs may also have a labeling effect, when money from the transfer is perceived as already allocated to expenditures for a child, for example. There is some evidence of this effect from evaluations in developed countries (Kooreman, 2000; Fraker, Martini & Ohls, 1995), and there is also suggestive evidence from low-income countries—where children’s school attendance is continued, even in the absence of conditions (Schady et. al, 2008).
- In Morocco, a government labeled cash transfer (LCT) program—not conditional on school attendance but explicitly labeled as an education support program—was as effective as conditioning on improving school attendance (Benhassine et al., 2014).