Saturday, 19 October 2019: 2:20 PM
A survey of the experimental economics literature related to contests suggests that people over-compete. Contests by their nature encourage effort beyond the socially optimal level. Observed behavior in the laboratory has documented that the amount individuals spend on a contest exceeds even the predicted behavior of a risk-neutral, expected wealth-maximizing individual. Using a lab-in-the-field design in Uganda, we analyze whether lottery-linked savings accounts can generate positive spillovers. Lottery-linked savings accounts enter a portion of your deposit into a monthly lottery, while the remaining balance is deposited in a fixed deposit savings account. We work closely with a local microfinance institution in Uganda to study the effects of this intervention with 145 subjects, over two phases. Advertisements for the new accounts ran one month prior to its offering. In Phase 1, subjects are randomly assigned to either a fixed deposit savings account or one of two treatment groups. Treatments groups differ based on the proportion of the deposit that goes into the lottery and into the fixed deposit account. In Phase 2, subjects either are placed in a fixed deposit savings account or a treatment group, wherein the lottery has a prize set, or control group. Results show that subjects who participate in the lottery deposit more frequently and maintain higher average account balances relative to the control group across both phases. The effect is exacerbated by less risk-averse subjects. In sum, our results align with experimental results regarding competitive behavior and suggest the contests should be considered as a potential development intervention to affect savings behavior.