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

89 Pages Posted: 23 Feb 2017 Last revised: 23 Jan 2019

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: December 1, 2018

Abstract

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, negative consequences in the labor market, and increase in crime on Saturdays. 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

Ben-David, Itzhak and Bos, Marieke, Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol (December 1, 2018). Fisher College of Business Working Paper No. 2017-03-006; Swedish House of Finance Research Paper No. 17-11. 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://fisher.osu.edu/fin/faculty/Ben-David/index.htm

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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