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  • May 2022
  • Article
  • Management Science

Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts

By: Shawn A. Cole, Benjamin Iverson and P. Tufano
  • Format:Print
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Abstract

This paper studies the adoption and impact of prize-linked savings (PLS) accounts, which offer lottery-like payouts to individual account holders in lieu of interest. Using microlevel data from a bank in South Africa, we show that PLS is attractive to a broad group of individuals, with financially constrained individuals and those with no other deposit accounts particularly likely to participate. Individuals who choose to use PLS increase their total savings on average by 1% of annual income. Exploiting the random assignment of prizes, we present causal evidence that PLS substitutes for lottery gambling but is a complement to standard savings.

Keywords

Household Finance; Banking; Savings; Prize-linked Savings; Lottery; Household; Personal Finance; Saving; Banks and Banking

Citation

Cole, Shawn A., Benjamin Iverson, and P. Tufano. "Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts." Management Science 68, no. 5 (May 2022): 3282–3308.

About The Authors

Shawn A. Cole

Finance
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Peter Tufano

Finance
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