Gambling, Saving, and Lumpy Liquidity Needs

Sylvan Herskowitz

American Economic Journal: Applied Economics, 2021, vol. 13, issue 1, 72-104

Abstract: I present evidence that unmet liquidity needs for indivisible, "lumpy," expenditures increase demand for betting as a second-best method of liquidity generation in the presence of financial constraints. With a sample of 1,708 sports bettors in Kampala, Uganda, I show that participants' targeted payouts are linked to anticipated expenditures, while winnings increase lumpy expenditures disproportionately. I show that a randomized savings treatment decreases demand for betting. And I use two lab-in-the-field experiments to show that unmet liquidity needs and saving ability are important mechanisms. These results cannot be explained by betting as a purely normal good.

JEL-codes: C93 D81 G51 L83 O12 O16 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1257/app.20180177

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