American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Gambling, Saving, and Lumpy Liquidity Needs
American Economic Journal: Applied Economics
(pp. 72–104)
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 increase lumpy expenditures disproportionately. 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.Citation
Herskowitz, Sylvan. 2021. "Gambling, Saving, and Lumpy Liquidity Needs." American Economic Journal: Applied Economics 13 (1): 72–104. DOI: 10.1257/app.20180177Additional Materials
JEL Classification
- C93 Field Experiments
- D81 Criteria for Decision-Making under Risk and Uncertainty
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- L83 Sports; Gambling; Restaurants; Recreation; Tourism
- O12 Microeconomic Analyses of Economic Development
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance