"Gambling, Saving, and Lumpy Liquidity Needs"
American Economic Journal: Applied Economics Vol 13, No.1, Jan 2021
American Economic Journal: Applied Economics Vol 13, No.1, Jan 2021
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Main Paper, Final Ungated Version
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Online Appendices
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Abstract:
I present evidence that unmet liquidity needs for indivisible, “lumpy”, expenditures increase demand for betting as a second-best method of liquidity generation in the presence of financial constraints. With a sample of 1,708 sports bettors in Kampala, Uganda, I show that participants’ targeted payouts are linked to anticipated expenditures while winnings disproportionately increase lumpy expenditures. I show that a randomized savings treatment decreases demand for betting. And I use two lab-in-the-field experiments to show that unmet liquidity needs and saving ability are important mechanisms. These results cannot be explained by betting as a purely normal good.