Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol

Fisher College of Business Working Paper No. 2017-03-006

Charles A. Dice Working Paper No. 2017-06

Swedish House of Finance Research Paper No. 17-11

The Review of Financial Studies, forthcoming

72 Pages Posted: 23 Feb 2017 Last revised: 28 Apr 2020

See all articles by Itzhak Ben-David

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Marieke Bos

Swedish House of Finance - Stockholm School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 27, 2020

Abstract

Increased availability of alcohol may harm individuals if they have present-focused preferences and consume more than initially planned. Using a nationwide experiment in Sweden, we study the credit behavior of low-income households around the expansion of liquor stores' operating hours on Saturdays. Consistent with store closures serving as commitment devices, the policy led to higher credit demand, more default, increased dependence on welfare, and higher crime on Saturdays. The effects are concentrated among the young population due to higher alcohol consumption combined with tight liquidity constraints. The policy's impact on indebtedness is estimated at 4.5 times the expenditure on alcohol.

Keywords: Impulsive consumption, Commitment device, Alcohol, Consumer credit

JEL Classification: D03, D12, I18, L51, L66

Suggested Citation

Ben-David, Itzhak and Bos, Marieke, Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol (April 27, 2020). Fisher College of Business Working Paper No. 2017-03-006, Charles A. Dice Working Paper No. 2017-06, Swedish House of Finance Research Paper No. 17-11, The Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=2921237 or http://dx.doi.org/10.2139/ssrn.2921237

Itzhak Ben-David (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://https://u.osu.edu/ben-david.1/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Marieke Bos

Swedish House of Finance - Stockholm School of Economics ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

HOME PAGE: http://www.mariekebos.org

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