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Savings and Prize-Linked Savings Accounts

  • Atalay, Kadir
  • Bakhtiar, Fayzan
  • Cheung, Stephen L.
  • Slonim, Robert

Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially-fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings.

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Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2013-12.

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Date of creation: Jun 2013
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Handle: RePEc:syd:wpaper:2123/9259
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