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Are Consumers More Willing to Invest in Luck During Recessions?

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Abstract

We use monthly data on gross expenditure on luck and skill games in Italy to investigate whether people react to recessions investing in activities based on fortune or ability. Luck game expenditure is volatile and positively correlated with unemployment in economic downturns. Naive consumers tend to consider luck games as a potential source of additional income during recessions. Skill game expenditure is persistent over time and uncorrelated with the unemployment rate, suggesting a more balanced attitude of skill consumers. This study provides evidence on the prevailing behavior and reaction of expert or naïve consumers when facing economic downturns.

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Notes

  1. European Commission, http://ec.europa.eu/growth/sectors/gambling_it.

  2. Italian gambling regulatory authority (AAMS) data, http://www.aams.gov.it.

  3. Official AAMS monthly series on aggregate spending in gambling started in January 2009 and ended in October 2012. This publication was never resumed.

  4. The 10-year government bond yield reached a peak of 5925 on July 18, then peaked again at 5891 on July 28.

  5. This intuition is supported formally by the existence of a significant intercept shift in the AR(1) model for the logarithm of the confidence index (P-value lower than 0.001).

  6. The correlation between the male unemployment rate and the confidence index throughout the period is negative, but the relationship changes over time. In the pre-crisis period the correlation between the two is weakly positive (0.46) while after July 2011 a neat negative relationship emerges (−0.84).

  7. Non-significant interaction terms have been dropped in a backward selection process.

  8. Granger and Newbold (1974) suggest that a high value for R\(^{2 }\)combined with a low value of the Durbin Watson statistic is an indication of spurious relationship. Following this indication, we found no signals of spurious regression since the statistics are 2.247 for the skill game regression and 2.271 for the luck game regression.

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Acknowledgments

We thank two anonymous referees for helpful comments. Financial support from FARB (FFBO127297—University of Bologna) is gratefully acknowledged.

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Authors and Affiliations

  1. Department of Economics, University of Bologna, Strada Maggiore 45, Bologna, 40126, Italy

    Sara Capacci, Emanuela Randon & Antonello Eugenio Scorcu

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  1. Sara Capacci
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  2. Emanuela Randon
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  3. Antonello Eugenio Scorcu
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Correspondence to Emanuela Randon.

Appendix

Appendix

See Table 3.

Table 3 Estimation results for regressions with a single macroeconomic explanatory variable (unemployment and confidence index considered)
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Capacci, S., Randon, E. & Scorcu, A.E. Are Consumers More Willing to Invest in Luck During Recessions?. Ital Econ J 3, 25–38 (2017). https://doi.org/10.1007/s40797-016-0043-x

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