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Adversity-hope hypothesis: Air pollution raises lottery demand in China

Author

Listed:
  • Soo Hong Chew

    (Southwestern University of Finance and Economics
    National University of Singapore)

  • Haoming Liu

    (National University of Singapore
    IZA Institute of Labor Economics)

  • Alberto Salvo

    (National University of Singapore)

Abstract

The empirical literature points to a stylized phenomenon of increased demand for hope following adversity. Clotfelter and Cook (1989) suggest that hope is a key sentiment underpinning recreational gambling. Chew and Ho (1994, this journal) offer the view of hope being experienced in lottery products when people enjoy delaying the resolution of uncertainty. Taking air quality as an indicator of subjective well-being, we hypothesize a positive causal relationship between air pollution and lottery sales. We test this hypothesis using data from China and find that air pollution measured by particle concentration increases demand for a popular lottery for which province-level daily sales records exist. The relationship can readily be seen on combining high-frequency, spatially resolved lottery sales and particle pollution data. Our findings support the adversity-hope hypothesis in the context of air quality and lottery sales and point to further tests using other measures of adversity and proxies of demand for hope.

Suggested Citation

  • Soo Hong Chew & Haoming Liu & Alberto Salvo, 2021. "Adversity-hope hypothesis: Air pollution raises lottery demand in China," Journal of Risk and Uncertainty, Springer, vol. 62(3), pages 247-280, June.
    • Handle: RePEc:kap:jrisku:v:62:y:2021:i:3:d:10.1007_s11166-021-09353-w
    DOI: 10.1007/s11166-021-09353-w
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    Cited by:

    1. Can Xu & Andreas Steiner & Jakob de Haan, 2023. "Does Economic Policy Uncertainty Encourage Gambling? Evidence from the Chinese Welfare Lottery Market," CESifo Working Paper Series 10241, CESifo.

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    More about this item

    Keywords

    Adversity; Hope; Attitudes toward risk and hope; Environmental degradation; Air pollution; Lottery demand; Particulate matter; Haze; Smog; Instrumental variables;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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