Working Paper: NBER ID: w23211
Authors: Itzhak Bendavid; Marieke Bos
Abstract: Increased availability of alcohol may harm individuals if they have present-focused preferences and consume more than initially planned. Using a nationwide experiment in Sweden, we study the credit behavior of low-income households around the expansion of liquor stores' operating hours on Saturdays. Consistent with store closures serving as commitment devices, the policy led to higher credit demand, more default, increased dependence on welfare, and higher crime on Saturdays. The effects are concentrated among the young population due to higher alcohol consumption combined with tight liquidity constraints. The policy's impact on indebtedness is estimated at 4.5 times the expenditure on alcohol.\n
Keywords: Impulsive Consumption; Financial Well-Being; Alcohol Availability; Credit Behavior; Welfare Dependence
JEL Codes: D03; D12; I18; L51; L66
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased availability of alcohol due to extended liquor store hours (L66) | increased credit demand (E51) |
| increased availability of alcohol due to extended liquor store hours (L66) | higher default rates (G33) |
| increased availability of alcohol due to extended liquor store hours (L66) | increased dependence on welfare (I38) |
| increased availability of alcohol due to extended liquor store hours (L66) | higher crime rates on Saturdays (K42) |
| increased credit demand (E51) | increased dependence on welfare (I38) |
| increased credit demand (E51) | higher default rates (G33) |
| increased credit demand (E51) | higher crime rates on Saturdays (K42) |
| increased dependence on welfare (I38) | higher crime rates on Saturdays (K42) |
| increased availability of alcohol due to extended liquor store hours (L66) | increased indebtedness (F65) |
| increased indebtedness (F65) | higher default rates (G33) |