Save, Gamble, or Both? The Relationship between Premium Bond Sales and Lottery Sales in the United Kingdom

Author

Kaden GraceFollow

Date of Award

Spring 5-7-2022

Document Type

Undergraduate Thesis

Department

Economics

First Advisor

Thomas Garrett

Second Advisor

Natalia Kolesnikova

Third Advisor

Jon Moen

Relational Format

Dissertation/Thesis

Abstract

Four out of every ten Americans are unable to pay for an unexpected $400 bill out of their savings accounts. To ameliorate this problem, one policy to incentivize saving is a Prize-Linked Savings Account (PLSA). Unlike a traditional savings account that pays out a consistent rate of return, a PLSA pools the interest on all deposits and distributes the returns in randomly drawn prizes (similar to a lottery). However, PLSAs remain illegal in many areas due to a concern that the introduction of a private or public PLSA could cannibalize revenue from an existing state-sponsored lottery, thus restricting the state’s ability to generate revenue for “good causes” like infrastructure and education. This undergraduate research thesis focuses on the relationship between Premium Bond sales, a PLSA run by the United Kingdom, and lottery sales in the UK. The empirical results reveal that Premium Bonds and lottery sales have no statistical or economic relationship, which implies that a state may be able to legalize PLSAs to incentivize saving without experiencing a reduction in state lottery revenue. This research provides important policy implications for the state of Mississippi, which battles high poverty and has also recently introduced a state lottery.

Recommended Citation

Grace, Kaden, "Save, Gamble, or Both? The Relationship between Premium Bond Sales and Lottery Sales in the United Kingdom" (2022). Honors Theses. 2615.
https://egrove.olemiss.edu/hon_thesis/2615

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