Presenters: Isaac Dixon
Authors: Nathan Anderson, Isaac Dixon
Faculty Advisor: Benjamin Blau
Institution: Utah State University
In developing countries, lottery spending is extremely prominent. In Haiti, about 20% of total GDP is spent at the 30,000 lottery booths scattered across the country. Many other developing countries face a similar problem. Anecdotally, we can report a large number of lottery booths in every community visited in the Dominican Republic. In addition to the prevalence of lottery spending, these countries face limited access to financial resources and have underdeveloped financial systems. The purpose of our research is to test the hypothesis thatwhen given the opportunity, financial literacy education will change individuals’ behavior from gambling to investing in third-world countries.We have created an experiment that draws random monthly returns from the S&P 500. This experiment will simulate the expected rate of return in the stock market, and randomly select individuals to participate. The first treatment arm will be shown an educational video about the marginal benefit of micro-investing versus lottery participation. We will then test the effect of this educational treatment on the individuals’ preference for lottery participation versus micro-investing by offering them payment in lottery tickets, or pesos which they can use to invest in our game or take home. The second treatment arm will be given the opportunity to invest, receive lottery tickets, or take the money, however, this group will not be shown the educational video. The control group will be given the option of lottery tickets or pesos. Based on our results, powerful inferences will be made about how to help strengthen these struggling economies through providing basic education on financial literacy and giving an opportunity to receive compounding interest through a stock market.