Gamblers Learn from Experience

  • with Joshua Blumenstock, UC Berkeley.

  • Mobile phone-based gambling has grown wildly popular in Africa. Commentators worry that low ability gamblers will not learn from experience, and may rely on debt to gamble. Using data on financial transactions for over 50 000 Kenyan smartphone users, we find that gamblers do learn from experience. Gamblers are less likely to bet following poor results and more likely to bet following good results. The reaction to positive and negative feedback is of equal magnitude, and is consistent with a model of Bayesian updating. Using an instrumental variables strategy, we find no evidence that increased gambling leads to increased demand for debt.

  • arXiv:2011.00432

On Track for Retirement?

  • Over sixty percent of employees at a large South African company contribute only the minimum rate of 7.5 percent of their salary to a retirement fund—far below the rate of 15 percent recommended by financial advisers. I use a field experiment to investigate whether providing employees with a retirement calculator, which shows projections of retirement income, leads to increases in contributions. The impact is negligible. The lack of response to the calculator suggests many employees may wish to save less than the 7.5 percent minimum. I provide a model of asymmetric information to explain the current equilibrium.

  • arXiv:2005.01692
  • Revision requested at the Journal of Economic Behavior & Organisation

Financial Literacy in South Africa

  • with Lwanga Elizabeth Nanziri, University of Stellenbosch.

  • We analyse measures of financial literacy, included in the NIDS survey for the first time in Wave 5. South Africa follows patterns found in other countries. Less educated and low income respondents display low levels of financial literacy. Most countries have large gender gaps in financial literacy while the gender gap is absent in South Africa. Controlling for a number of socio-demographic variables, financial literacy is positively related to ownership of a pension and of mutual funds, stocks, or shares.

  • SALDRU Working Paper Number 242