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American Economic Review: Vol. 101 No. 5 (August 2011)

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The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery

Article Citation

Kuhn, Peter, Peter Kooreman, Adriaan Soetevent, and Arie Kapteyn. 2011. "The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery." American Economic Review, 101(5): 2226-47.

DOI: 10.1257/aer.101.5.2226

Abstract

Each week, the Dutch Postcode Lottery (PCL) randomly selects a postal code, and distributes cash and a new BMW to lottery participants in that code. We study the effects of these shocks on lottery winners and their neighbors. Consistent with the life-cycle hypothesis, the effects on winners' consumption are largely confined to cars and other durables. Consistent with the theory of in-kind transfers, the vast majority of BMW winners liquidate their BMWs. We do, however, detect substantial social effects of lottery winnings: PCL nonparticipants who live next door to winners have significantly higher levels of car consumption than other nonparticipants. JEL: D14, D91, H23, H27

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Authors

Kuhn, Peter (U CA, Santa Barbara)
Kooreman, Peter (Tilburg U)
Soetevent, Adriaan (U Amsterdam)
Kapteyn, Arie (RAND Corporation, Santa Monica, CA)

JEL Classifications

D14: Personal Finance
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H27: Taxation, Subsidies, and Revenues: Other Sources of Revenue


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