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Leveraging the Lottery for Financial Inclusion: Lotto-Linked Savings Accounts in Haiti

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  • Felipe Dizon
  • Travis J. Lybbert

Abstract

Many poor Haitians are more familiar with lottery wagers than any other financial transaction and lack access to savings products. Using a lab-in-field experiment in Haiti, we test a prototype lotto-linked savings (LLS) product that returns lotto credit in lieu of interest. We find that LLS increased total savings by 22%, nearly twice the savings increase induced by raising the interest rate from 5% to 20%. The presence, rather than the extent, of the lotto component seems to drive this savings response most. The LLS-induced increase in savings was financed by reductions in lotto spending and traditional savings and smaller reductions in consumption. These reallocations increased subjects’ overall expected returns in the experiment. Those who allocated more to the lottery before LLS and who overweight small probabilities increased savings most in response to LLS.

Suggested Citation

  • Felipe Dizon & Travis J. Lybbert, 2021. "Leveraging the Lottery for Financial Inclusion: Lotto-Linked Savings Accounts in Haiti," Economic Development and Cultural Change, University of Chicago Press, vol. 69(4), pages 1323-1349.
    • Handle: RePEc:ucp:ecdecc:doi:10.1086/705681
    DOI: 10.1086/705681
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    Cited by:

    1. Jindapon, Paan & Sujarittanonta, Pacharasut & Viriyavipart, Ajalavat, 2022. "Prize-linked savings games: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 133(C), pages 202-229.
    2. Shawn Cole & Benjamin Iverson & Peter Tufano, 2022. "Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts," Management Science, INFORMS, vol. 68(5), pages 3282-3308, May.
    3. Dizon, Felipe & Yu, Jisang, 2021. "Nudges versus subsidies: Experimental evidence on the demand for a nutritious food in India," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 1091-1111.

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