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When Saving is Gambling

69 Pages Posted: 1 Nov 2014 Last revised: 10 Apr 2017

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Date Written: February 13, 2017


Prize-linked savings (PLS) accounts — which allocate interest using lottery payments rather than fixed interest — attempt to 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: household finance, prize linked savings, gambling markets, casino gambling, lottery

JEL Classification: D18, D14, L83

Suggested Citation

Cookson, J. Anthony, When Saving is Gambling (February 13, 2017). Finance Down Under 2015 Building on the Best from the Cellars of Finance Paper; Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: or

J. Anthony Cookson (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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