DP16426 How to Communicate the Nudge: A Real-World Policy Experiment

Author(s):	Oren Bar-Gill, Alma Cohen
Publication Date:	August 2021
Keyword(s):	communication, Debt collection, Disclosure, Nudge
JEL(s):	G41, G51, K49
Programme Areas:	Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=16426

Disclosure-based Nudges are being increasingly utilized by governments around the world to achieve policy goals related to health, safety, employment, environmental protection, retirement savings, credit, debt and more. And, yet, a critical aspect of these Nudge-type policy interventions-the mode of communication-remains unexplored. What is the best way to communicate information to individuals-by letter, by phone call (or voice message), by email, by text message or video message? We begin to answer this basic question using a real-world policy experiment on debt collection procedures. Debtors often lack adequate information about the debt, the judgment, and the enforcement and collection procedures. As a result, the process of debt collection is often harmful to the debtor and ineffective in securing repayment. We conducted a study (N = 36,362), in cooperation with the Israeli Ministry of Justice, to improve communication with debtors and to evaluate the effect of such improved communication strategies on collection procedures and outcomes. A novelty of this study is our focus on the choice of medium-telephone, regular mail, text message and video message-holding fixed the content of the communication. We found that digital communication strategies, specifically communicating via text message, were the most cost-effective, significantly improving outcomes for both debtors and creditors. Our results should inform the choice of communication mediums in the many settings in which disclosure-based Nudge policies are employed.