Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol
89 Pages Posted: 22 Mar 2017
Date Written: March 2017
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.
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