Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol
Charles A. Dice Working Paper No. 2017-06
72 Pages Posted: 23 Feb 2017 Last revised: 12 Dec 2018
Date Written: December 2018
Increased availability of alcohol may harm individuals if they have time-inconsistent preferences and consume more than planned before. We study this idea by examining the credit behavior of low-income households around the expansion of the opening hours of retail liquor stores during a nationwide experiment in Sweden. Consistent with store closures serving as commitment devices, expanded opening hours led to higher alcohol consumption and greater consumer credit demand, default, and negative consequences in the labor market. Our calculation shows that the effects of alcohol consumption on indebtedness could amount to 4.4 times the expenditure on alcohol.
Keywords: household finance, behavioral finance, commitment device, alcohol, consumer credit
JEL Classification: D03, D12, I18, L51, L66
Suggested Citation: Suggested Citation