Financial literacy and its relation to lottery gambling consumption

ABSTRACT

This study uses restricted-version data from the 2018 state-by-state survey of the National Financial Capability Study to investigate the relationship between financial literacy and lottery consumption frequency. To control for the potential endogeneity of financial literacy, I employ the ordered probit model with an endogenous regressor by instrumenting the average education level of a zip-code area for financial literacy. The results indicate that an increase in financial literacy significantly reduces the lottery consumption of those who play with moderate frequency, while no marked curbing effects are found for heavy lottery players. This suggests that different policies are needed to reduce lottery consumption for those who engage with moderate frequency and those who engage with high frequency.

KEYWORDS:

• Gambling
• financial literacy
• lottery
• National Financial Capability Study

JEL CLASSIFICATION:

• D12
• D14
• D90

Disclosure statement

No potential conflict of interest was reported by the author(s).

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily represent the official policy or position of any agency of the Korean government.

Data availability statement

Due to the confidential data use agreement for using restricted-version data from the National Financial Capability Study, analytical data used in this study are not available.

Notes

1 The restricted version of the SSS-NFCS data provides respondents’ residential zip-code, while the public-access data provide the state-identifier. The restricted version of the data was used under the confidential data use agreement.

Additional information

Funding

Funding This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.