Doctoral Dissertation Research in DRMS: Testing the Links between Savings, Credit, Betting, and Consumption among Small Business Owners

University Of California-Berkeley, Berkeley CA

Investigators

Abstract

This research examines the links between consumption, savings, credit, and betting decisions among small business owners. Legal betting on international football matches has exploded across much of sub-Saharan Africa and is wildly popular among young men in many countries. Many of these participants are small enterprise owners and household heads. The project looks at the impacts of high intensity sports betting on participants' businesses and families. In addition the project hypothesizes that savings and credit constraints contribute to the allure of betting. While risk-aversion is a commonly made assumption about human behavior, it may not hold in a setting with severe financial constraints. The promise of a large infusion of liquidity is one of the main stated appeals of betting for participants. The field research will take place in Uganda where a pilot has showed that nearly half the men in the informal sector reported to participate in sports betting with a mean intensity among bettors of 10% of weekly earnings. The study creates a representative weekly panel of small enterprise owners in Uganda's capital while tracking earnings, consumption, and betting behavior. A set of randomized interventions allows for the identification of a causal relationship between savings and credit constraints on betting behavior as well as information treatments about rate of return. This research builds on insights from the development economics, behavioral economics, and psychology fields. The project is one of the first efforts to explore topics relating to the causes and consequences of risk-seeking betting activity in a developing country setting with a population close to the poverty line.