Gambling for Retirement: The Economics of Savings Lotteries
By Jared Gars, Justin Holz, Rodemeier & Juan Miguel Villa
Governments frequently use lottery-like incentives to encourage socially desirable behavior (“Pigouvian lotteries”). We study lotteries that encourage retirement savings in a nationwide field experiment with over 380,000 participants in Colombia’s public pension system. Lotteries increase savings during the qualification period, but this effect is almost entirely offset by subsequent declines in savings, as workers strategically shift the timing of deposits. Lotteries also crowd out demand for valuable life and disability insurance and disproportionately benefit wealthier participants. A complementary experiment on deterministic savings subsidies (“matches”) shows they are more cost-effective than lotteries and generate lasting habit formation in savings. More broadly, our findings illustrate that spillovers across choice domains and over time can fundamentally reshape the welfare implications of behavioral policies.
Source SSRN
