Lottery Wins Research Articles

Consumption Responses to Income Shocks through Lottery Winning: Evidence from Older Adults in Singapore

AbstractWe study the effects of lottery winning on consumption spending using household survey data of older individuals aged 50–70 years in Singapore. We find strong consumption responses to a transitory income shock from lottery wins, and lottery winners spend about half of their prizes within 12 months of winning. We show that consumption responses are stronger among households with more binding liquidity constraints. The strong consumption response suggests that fiscal stimulus policies or other public transfer programmes could effectively boost consumption spending in the short run.

The Luckiest Strategy on Earth? A Better Way to Buy Lottery Scratch-off Tickets

Summary Lottery winner Dr. Joan Ginther, sometimes called “the luckiest woman on earth,” appeared to be pursuing a deliberate strategy in her lottery wins. Journalist Peter Mucha made a conjecture as to what her strategy might have been, and we analyze his proposal here. Using calculus, we show that the strategy proposed by Mucha is indeed better than the naive strategy. We give formulas showing how much a gambler pursuing this strategy can expect to make.

The sentimental propagation of lottery winnings: Evidence from the Spanish Christmas lottery

Using the Spanish Christmas lottery as a natural experiment, the impact of geographically clustered lottery winnings on consumer sentiment and intended durable consumption is analyzed. Albeit not receiving lottery prizes, consumers in winning provinces become significantly more optimistic about the Spanish macroeconomic conditions than those living elsewhere. This variation in sentiment is shown to be orthogonal to changes in regional fundamentals and leads to a rise in spending intentions. Young, less educated, low-income, and unemployed individuals react stronger to the lottery shock. At the regional level, lottery wins significantly increase car licenses, reduce unemployment, and intensify job creation and prices.

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

Abstract We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event study design. We first examine individual and household earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra ${\$}$1 of unearned income in a given period reduces household labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption expenditure by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Next we examine margins of adjustment other than earnings and, in the course of doing so, address a number of important economic questions about how additional wealth or unearned income affect retirement decisions and labor market dynamics, family formation and dissolution, entrepreneurship and self-employment, and geographic mobility and neighborhood choice. Last, we carefully compare our findings to those reported in existing lottery studies. This comparison reveals that existing U.S. studies substantially underestimate wealth and income effects because they use measures that understate the earnings responses and overstate the after-tax wealth changes associated with lottery wins.

Lottery Wins and Employment in a Low-Income Country: Impacts and Mechanisms

Lottery Wins and Employment in a Low-Income Country: Impacts and Mechanisms

Does money strengthen our social ties? Longitudinal evidence of lottery winners

We study the effect of lottery wins on the strength of social ties and its different types, including support networks, in the United Kingdom. On average, we find that winning more in the lottery increases the probability of meeting friends on most days, which is consistent with the complementary effect of income on the strength of social ties. The opposite is true with regards to social ties held for more instrumental reasons such as talking to neighbours. Winning more in the lottery also lessens an individual support network consistently with a substitution of income and support network. However, further robustness checks reveal that such average lottery effects are driven by individuals exhibiting very large wins only, thus suggesting that small to medium-sized wins (below £10k) may not be enough to change people’s social ties and support network in a substantial way.

Effects of Lottery Wins on Household Labor Supply

Effects of Lottery Wins on Household Labor Supply

Income windfalls and overweight: evidence from lottery wins

We examine the impact of an income windfall (from a lottery win) on an individual's overweight and Body Mass Index (BMI). We use longitudinal data from the United Kingdom, where a large proportion of the population plays the lottery, and retrieve income effect estimates using time and individual specific fixed effects alongside a set of relevant controls. Although our findings suggest any income windfall may lead to a contemporaneous increase in overweight, we document evidence that a £1,000 win reduces the probability of overweight in the range by up to 3 percentual points 12 months after the lottery win. Estimates are heterogeneous across working hours and educational attainment. A £1000 lottery win reduces the risk of overweight among low educated individuals by 4.5–5 percentual points (pp)12 months after the lottery win.

Do people believe that you can have too much money? The relationship between hypothetical lottery wins and expected happiness

AbstractDo people think that there is such a thing as too much money? The present research investigated this question in the context of hypothetical lottery wins. By employing a mental simulation approach, we were able to examine how people respond to increasing envisioned jackpot amounts, and whether there are individual differences in people’s reactions. Across five empirical studies (total N = 1,504), we consistently found that, overall, the relationship between imagined lottery wins and expected happiness is characterized by an inverted U-shaped curve, with expected happiness being highest around an envisioned win of roughly 10 million pounds. Both lower and higher envisioned wins reduced participants’ overall expected happiness. In addition to this overall pattern, we identified three clusters of participants who react differently to expected increases in wealth. These clusters mainly differed in terms of how soon the top of the expected happiness curve was reached, and if and when the curve started to drop. Finally, we also found some interesting cluster differences in terms of participants’ prosocial and proself motivations.

Can Unearned Income Make Us Fitter? Evidence from Lottery Wins

Although lower income is associated with overweight (and obesity), such an association is explained by a number of other confounding effects such as omitted variables (e.g., time preferences) explaining that income effect on overweight. We study the effect of unearned income shocks resulting from a lottery win (windfall income) on both overweight (alongside obesity and body mass index) distribution. We draw upon longitudinal data from the United Kingdom, a country where about half of a population plays the lottery. Our results suggest no evidence of contemporaneous effects of income on overweight, but a significant lagged effect. We find a reduction in overweight 12 months after a lottery win. A 10,000-sterling win reduces overweight by 2-3 percentage points. Furthermore, we document a nonlinear effect up to 36 months after the lottery win, suggesting that small wins increase overweight and large wins reduce it. The effect of a lottery win varies depending on an individual’s working hours and educational attainment. A lottery win among low education individuals decreases the risk of overweight.

How income changes affect mental health for working-age adults: a systematic review and meta-analysis

BackgroundIncome is thought to be a major determinant of mental health, but we believe this literature has not been quantitatively synthesised in its entirety. We systematically reviewed studies assessing the effect of income changes on mental health in working-age adults (16–64 years). MethodsWe searched seven databases (MEDLINE, Embase, Web of Science, PsycINFO, ASSIA, EconLit, and RePEc) for randomised controlled trials and quantitative non-randomised studies with no date limits on Feb 5, 2020 (PROSPERO CRD42020168379). We included English-language studies measuring effects of individual or household income change on any mental health or wellbeing outcome (search terms included mental health, depression, anxiety, wellbeing, quality of life, life satisfaction, psychological distress AND income [or synonym] NEAR change [or synonym]). Risk of bias was assessed using Cochrane methods. We did three-level, random-effects, meta-analyses and explored potential effect modification using meta-regression and stratified analyses. Critical risk of bias studies were excluded from primary analyses. FindingsOf 16 521 hits screened, 136 studies (12·5% randomised controlled trials) were narratively synthesised and 86 meta-analysed. Risk of bias was high, with 41 studies (30·1%) rated critical and 64 (47·1%) serious or high. The source of income change was generally not known (n=63, 46·3% of studies), with welfare policies (n=38, 28·0%), natural disasters (n=10, 7·4%), and lottery wins (n=7, 5·1%) being the most commonly described sources. A binary income increase was associated with 0·08 SD improvement in mental health (95% CI 0·038 to 0·13; n=258 637) and an income decrease with 0·21 SD worsening (–0·30 to –0·13; n=227 804). For continuous log(income) exposures, a 10% income increase was associated with 0·003 SD improvement in mental health (0·000 to 0·005; n=1 510 221). For wellbeing, binary increases were associated with 0·27 SD improvement (0·14 to 0·41; n=163 969) and a 10% income increase with 0·003 SD improvement (0·002 to 0·005; n=105 326). Heterogeneity was high (I2=79–87%). Effect sizes were larger in low-income and middle-income settings, for people of lower socioeconomic position, and in studies with higher risk of bias. InterpretationEffects are potentially larger for wellbeing outcomes, for income losses, and in the most socioeconomically disadvantaged. To support mental health, welfare policies need to reach the most disadvantaged, and consider wider factors such as financial insecurity and employment. FundingWellcome Trust (218105/Z/19/Z and 205412/Z/16/Z), National Health Service Research Scotland (SCAF/15/02), Medical Research Council (MC_UU_00022/2), and Chief Scientist Office (SPHSU17).

The importance of capital in closing the entrepreneurial gender gap: A longitudinal study of lottery wins

Would improving women's access to capital reduce the gender entrepreneurial gap? We study this issue by exploiting longitudinal data on lottery winners. Comparing between large to small winners, we find that an increase in lottery win in period t − 1 significantly increases the likelihood of becoming self-employed in period t. This windfall effect is statistically the same in magnitude for men and women; the top 25% winners (an average win = £831.16) in year t − 1 report a significant increase in the probability of self-employment in year t by approximately 2 percentage points, which is approximately 20–30% of the gender entrepreneurial gap. These results suggest that we can causally reduce the gender entrepreneurial gap by improving women's access to capital that might not be as readily available to the aspiring female entrepreneurs as it is to male entrepreneurs.

Parental Resources and College Attendance: Evidence from Lottery Wins

We examine US children whose parents won the lottery to trace out the effect of financial resources on college attendance. The analysis leverages federal tax and financial aid records and substantial variation in win size and timing. While per-dollar effects are modest, the relationship is weakly concave, with a high upper bound for amounts greatly exceeding college costs. Effects are smaller among low-SES households, not sensitive to how early in adolescence the shock occurs, and not moderated by financial aid crowd-out. The results imply that households derive consumption value from college, and household financial constraints alone do not inhibit attendance. (JEL G51, I22, I23, I24, I26, I28, J24, J31)

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event-study design that exploits variation in the timing of lottery wins. Our first contribution is to estimate the earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra dollar of unearned income in a given period reduces pre-tax labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Our second contribution is to develop and apply a rich life-cycle model in which heterogeneous households face non-linear taxes and make earnings choices along both intensive and extensive margins. By mapping this model to our estimated earnings responses, we obtain informative bounds on the impacts of two policy reforms: an introduction of UBI and an increase in top marginal tax rates. Our last contribution is to study how additional wealth and unearned income affect a wide range of behavior, including geographic mobility and neighborhood choice, retirement decisions and labor market exit, family formation and dissolution, entry into entrepreneurship, and job-to-job mobility.

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income

We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event-study design that exploits variation in the timing of lottery wins. Our first contribution is to estimate the earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra dollar of unearned income in a given period reduces pre-tax labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Our second contribution is to develop and apply a rich life-cycle model in which heterogeneous households face non-linear taxes and make earnings choices along both intensive and extensive margins. By mapping this model to our estimated earnings responses, we obtain informative bounds on the impacts of two policy reforms: an introduction of UBI and an increase in top marginal tax rates. Our last contribution is to study how additional wealth and unearned income affect a wide range of behavior, including geographic mobility and neighborhood choice, retirement decisions and labor market exit, family formation and dissolution, entry into entrepreneurship, and job-to-job mobility.

Does Money Strengthen Our Social Ties? Longitudinal Evidence of Lottery Winners

We study the effect of lottery wins on social ties and support network in the United Kingdom. On average, we find that winning more in the lottery increases the probability of meeting friends on most days, which is consistent with the complementary effect of income on social ties. The opposite is true with regards to social ties held for more instrumental reasons such as talking to neighbors. Winning more in the lottery also lessens an individual support network consistently with a substitution for instrumental social ties. However, further robustness checks reveal that the average lottery effects are driven by the few outliers of very large wins in the sample, thus suggesting that small to medium-sized wins (<£10k) may not be enough to change people's social ties and support network in a substantial way.

The effects of income on health: Evidence from lottery wins in Singapore

We estimate the causal effects of household income on self-reported health status by exploiting random variations in the amount of lottery prizes won. We find that a S$10,000 (US$7,245) increase in income via lottery wins improves individuals’ health by a standard deviation of 0.18. As possible mechanisms, we find that lottery wins increase household consumption spending and improve overall life satisfaction, but do not change healthcare spending, labor supply, and risky health behavior. Previous studies, which focused on the health effects of lottery prizes in Western European countries with strong social safety nets, do not find positive effects other than those on mental health. By contrast, the current study contributes to the literature by providing new evidence of the positive health effect of income via lottery wins in a country without strong social safety nets.

Optimal Play for Multiple Lottery Wins

We determine the optimal strategy for a family of lottery games involving repeated drawings with the same conditions, which includes Brazil's jogo do bicho and games typically offered by state lottery organizations in the United States under names such as Daily 4 or Cash 3. The proof that the strategy is optimal and the resulting formula for the probability of success both rely on a solution to a recursion that generalizes the usual Pascal recursion for binomial coefficients, which itself relies on a count of lattice paths. We illustrate how our result can be applied to focus on-the-ground investigations of suspicious patterns of lottery wins.

Parental Resources and College Attendance: Evidence from Lottery Wins

We examine U.S. children whose parents won the lottery to trace out the effect of financial resources on college attendance. The analysis leverages federal tax and financial aid records and substantial variation in win size and timing. While per-dollar effects are modest, the relationship is weakly concave, with a high upper bound for amounts greatly exceeding college costs. Effects are smaller among low-SES households, not sensitive to how early in adolescence the shock occurs, and not moderated by financial aid crowd-out. The results imply that households derive consumption value from college and household financial constraints alone do not inhibit attendance.

Parental Resources and College Attendance: Evidence from Lottery Wins

We examine U.S. children whose parents won the lottery to trace out the effect of financial resources on college attendance. The analysis leverages federal tax and financial aid records and substantial variation in win size and timing. While per-dollar effects are modest, the relationship is weakly concave, with a high upper bound for amounts greatly exceeding college costs. Effects are smaller among low-SES households, not sensitive to how early in adolescence the shock occurs, and not moderated by financial aid crowd-out. The results imply that households derive consumption value from college and household financial constraints alone do not inhibit attendance.