Mathias Rodemeier, Bocconi University

Gambling for Retirement: The Economics of Savings Lotteries

Abstract

Governments often use stochastic incentives that reward socially desirable behavior ("Pigouvian lotteries") but their effects and welfare implications are not well established. In a nationwide field experiment with 200,000 clients of Colombia's public pension fund, we study the effects of savings lotteries that offer the chance to win a prize if households meet a minimum savings threshold during a qualification period. We find that lotteries significantly increase savings during the qualification period, but this effect is short-lived: savings decline by nearly the same amount immediately afterward, offsetting most of the intended policy impact. Following subjects up to 4 years post-intervention, we find that lotteries fail to generate a habit to save. Lotteries are also regressive, do not target present-biased individuals, and unintentionally lead some households to forgo eligibility for life and disability insurance. Model-based estimates suggest that workers misperceive the winning odds of lotteries and that lotteries reduce welfare. We leverage a second large field experiment that randomizes deterministic savings subsidies ("matches") and show that they are more cost-effective than lotteries. Our results illustrate how Pigouvian lotteries backfire along multiple dimensions and how they compare to more traditional savings policies.

Matthias Rodemeier is an Assistant Professor at Bocconi University.

His research addresses questions at the intersection of public finance and behavioral economics, with applications to consumer policy and environmental regulation. Most of his studies uses field experiments to identify structural parameters underlying economic behavior and its implications for optimal policy.

Prior to joining Bocconi, he was a researcher at the Becker Friedman Institute of Economics at the University of Chicago. He obtained a Ph.D. in Economics from the University of Münster, with research stays at the University of Chicago, the University of California at San Diego, and Bonn University.

You can read more about Mathias Rodemeier here

CEBI contact: Christina Gravert.