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FEB 2017: New WP: Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol

I have a new working paper out

Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol 

together with Itzhak Ben-David , Ohio State University – Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Abstract

Increased availability of temptation goods might harm individuals if they have time-inconsistent preferences and consume more in the present than planned before. We study this idea by examining the credit behavior of low-income households around the expansion of the opening hours of retail liquor stores during a nationwide experiment in Sweden. Consistent with store closures serving as commitment devices, expanded operating hours led to higher alcohol consumption (Nordström and Skog 2003) and greater consumer credit uptake and default. Thus, our results show that limiting the availability of temptation goods can improve the financial wellbeing of individuals with inconsistent-time preferences.

Keywords: household finance, behavioral finance, time inconsistent preferences, commitment mechanisms, alcohol, consumer credit

JEL Classification: D03, D12, I18, L51, L66

Ben-David, Itzhak and Bos, Marieke, Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol (February 21, 2017). Fisher College of Business Working Paper No. 2017-03-006. Available at SSRN: https://ssrn.com/abstract=2921237