When saving is gambling

J. Anthony Cookson

Journal of Financial Economics, 2018, vol. 129, issue 1, 24-45

Abstract: Prize-linked savings (PLS) accounts, which allocate interest using lottery payments rather than fixed interest, encourage savings by appealing to households’ gambling preferences. I introduce new data on casino cash withdrawals to measure gambling, and examine how individual gambling expenditures respond to the introduction of PLS in Nebraska using a difference-in-differences design. After PLS is introduced, individuals who live in counties that offer PLS reduce gambling by at least 3% more than unaffected individuals. The substitution effect is stronger in low-frills gambling environments, which most resemble PLS, indicating that these accounts fulfill the desire to gamble.

Keywords: Prize linked savings; Gambling; Risk aversion; Financial literacy; Credit unions (search for similar items in EconPapers)
JEL-codes: D14 G21 L83 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:129:y:2018:i:1:p:24-45

DOI: 10.1016/j.jfineco.2018.04.001

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