Financial Literacy, Locus of Control, and Gambling Behavior in Australia

This study examines whether financial literacy is associated with reduced gambling risk using a large representative sample of the Australian population in the Household, Income and Labor Dynamics in Australia (HILDA) survey. We analyzed four waves of biennial data from 2016 to 2022 that contain financial literacy and gambling modules, covering 13,358 respondents aged 15 and above, corresponding to 21,140 person-year observations. We found that higher financial literacy was associated with lower gambling risk measured by the Problem Gambling Severity Index (PGSI). Instrumental variable regressions were used to address endogeneity and to strengthen the case for a causal relationship. However, financial literacy was not related to the gambling expenditure and the number of gambling activities respondents participated in. Mediation analysis suggested that locus of control might serve as a channel through which financial literacy mitigates the adverse consequences of gambling. The findings implied that financial knowledge may help reducing gambling-related harm, potentially via perceived control, even if it does not reduce participation or spending.