Events

High levels of alcohol consumption are more common among the poor. This fact could have economic consequences beyond mere income eff ects because alcohol impairs mental processes and decision-making. Since alcohol is thought to induce myopia, this paper tests for impacts on self-control and on savings behavior. In a three-week eld experiment with low-income workers in India, I provided 229 individuals with a high-return savings opportunity and randomized incentives for sobriety. The incentives signicantly reduced daytime drinking as measured by decreased breathalyzer scores. This in turn increased savings by approximately 60 percent. No more than half of this e ffect is explained by changes in income net of alcohol expenditures. In addition, consistent with enhanced self-control due to lower inebriation levels, incentivizing sobriety Reduced the impact of a savings commitment device. Finally, alcohol consumption itself is prone to self-control problems: over half of the study participants were willing to sacrifice money to receive incentives to be sober, exhibiting demand for commitment to increase their sobriety. These findings suggest that heavy alcohol consumption is not just a result of self-control problems, but also creates self-control problems in other areas, potentially even exacerbating poverty by reducing savings.