Gambling for Retirement: The Hidden Costs of Savings Lotteries in a Nationwide Experiment

Governments increasingly encourage socially desirable behavior with probabilistic incentives. We study such "Pigouvian lotteries'' in a retirement-savings field experiment with 387,000 workers in Colombia's public pension system. The lotteries induce sharp bunching at qualification thresholds, but workers mostly meet them by retiming rather than increasing deposits, leaving overall savings largely unaffected. Lotteries further crowd out valuable life and disability insurance and disproportionately reward wealthier savers. A welfare analysis shows that, once we account for these unintended consequences, lotteries reduce welfare. Our findings illustrate that behavioral spillovers across time and choice domains can reverse the verdict on behavioral public policies.