When Saving is Gambling
69 Pages Posted: 1 Nov 2014 Last revised: 10 Apr 2017
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: Suggested Citation