Alcohol consumption is a risk factor for several diseases. The loss of lucidity associated with its use could also affect the ability to make consistent decisions that individuals often face, besides self-control control problems that may also, like a vicious cycle, cause undesired alcohol consumption.
This paper empirically tests the impact of that present bias on savings behavior. The author, by conducting a field experiment with 229 cycle-rickshaw peddlers in Chennai, India, shows that increasing sobriety during the day causes an increase in individuals’ savings. This effect trickled, besides from the increased resources due to the decrease in alcohol spending, from the lowered self-control following sobriety. By the first-stage of tracking sobriety on savings behavior, the author isolated the effect of incentives for sobriety on alcohol consumption and finds that the demand of commitment devices for sobriety reinforces the positive effect of sobriety on self-control and that would mean a self-awareness about self-control problems by the individuals. Analogously, this suggests 1) alcohol use affects the mechanisms that strengthen poverty, 2) many policies that include incentives for sobriety may be effective to mitigate the effects alcohol consumption has on savings behavior.
This paper contributes to the abundant literature on self-control problems: effort provision in the workplace (Kaur et al., 2015), in consumption-savings decisions (Ashraf et al., 2006), in the smoking (Giné et al., 2010), in laboratory experiments (Augenblick et al. 2015, Augenblick and Rabin, 2018), among others. It helps also understand a significant part of the growing literature on saving decisions among the poor and the effect of incentives on the health-related behavior.
One could argue that few weeks of field experiment are very thin to capture the complex behaviors of the poor, and that there could be other biases playing a role in the long run, but the paper provides a neat and simple identification strategy. Must read.
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