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  4. August 2011
  5. The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery

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

  • Peter Kuhn
  • Peter Kooreman
  • Adriaan Soetevent
  • Arie Kapteyn
American Economic Review
vol. 101, no. 5, August 2011
(pp. 2226-47)
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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

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

Additional Materials

JEL Classification

  • D14 Personal Finance
  • D15 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