"Gambling, Saving, and Lumpy Liquidity Needs"
News and Blog Coverage:
- Aired on NPR/WBUR May 25, 2017 by Sonia Paul
- Financial Access Initiative - NEUDC 2016 Review of Most Interesting Papers
- World Bank, Development Impact - Job Market Paper Series
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 1,705 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.