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Means Tested Public Assistance and the Demand for State Lottery Tickets

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Author Info

  • John Laitner

    (Department of Economics, University of Michigan)

Abstract

Empirical evidence suggests that the poor spend a larger fraction of their income on gambling than the well-to-do. This paper shows that "means tests" for public-assistance eligibility could supply part of the explanation. Income support programs can distort private budget sets, conceivably leading to risk-taking behavior on the part of rational agents with standard, concave utility functions. Latter sections of the paper employ a calibrated life-cycle saving model to study resulting demands for actuarially fair lotteries numerically. The analysis demonstrates that allowing lotteries can simplify model-related computations a great deal. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1998.0042
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 1 (January)
Pages: 273-290

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Handle: RePEc:red:issued:v:2:y:1999:i:1:p:273-290

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  1. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 03-95, Wharton School Rodney L. White Center for Financial Research.
  2. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279.
  3. Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-45, December.
  4. Morgan, John, 2000. "Financing Public Goods by Means of Lotteries," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 761-84, October.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why buying a lottery ticket may be rational
    by Economic Logician in Economic Logic on 2008-01-28 09:08:00
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Cited by:
  1. Cletus C. Coughlin & Thomas A. Garrett, 2008. "Income and lottery sales: transfers trump income from work and wealth," Working Papers 2008-004, Federal Reserve Bank of St. Louis.

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