When Saving is Gambling

66 Pages Posted: 1 Nov 2014 Last revised: 24 Dec 2016

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Date Written: December 23, 2016

Abstract

This paper provides novel evidence on the substitution between financial gambles and gam- bling in other markets. My analysis uses new data on casino cash withdrawals and examines how individuals respond to the introduction of prize-linked savings (PLS) accounts, which randomly allocate interest using large lottery payments rather than fixed interest. After the introduction of PLS in Nebraska in 2012, 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 gam- bling 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 (December 23, 2016). Finance Down Under 2015 Building on the Best from the Cellars of Finance Paper. Available at SSRN: https://ssrn.com/abstract=2517126 or http://dx.doi.org/10.2139/ssrn.2517126

J. Anthony Cookson (Contact Author)

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

Boulder, CO 80309-0419
United States

Paper statistics

Downloads
235
Rank
103,588
Abstract Views
1,749