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Why Some States Adopt Lotteries and others Don'T

Author

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  • John E. Filer

    (University of South Alabama)

  • Donald L. Moak
  • Barry Uze

Abstract

In 1963, New Hampshire reintroduced the state-sponsored lottery in the United States. By late 1986, more than half of the 50 states had lotteries in operation or had approved lotteries through referenda. Of the scholarly journal articles that have analyzed the economics of state lotteries, most have been concerned with the regressivity of the implicit lottery tax. In this article, we address the more important question of why any such regressive tax, especially one in the form of legalized gambling, would be adopted in lieu of higher sales, property, or income taxes. Using a model of rational legislator behavior developed from public choice theory, we generate and test empirical models that explain the pattern of lottery adoption across states and the timing of such adoptions. In general, a given state will have a higher probability of adopting a lottery as an alternative source of state revenue, and will tend to adopt a lottery earlier, the greater the overall tax burden on the voters of the state, the greater the expected return from a lottery in the form of spendable revenue, the greater the difficulty in raising tax rates on other bases, and the fewer the number of poor people in the state.

Suggested Citation

  • John E. Filer & Donald L. Moak & Barry Uze, 1988. "Why Some States Adopt Lotteries and others Don'T," Public Finance Review, , vol. 16(3), pages 259-283, July.
    • Handle: RePEc:sae:pubfin:v:16:y:1988:i:3:p:259-283
    DOI: 10.1177/109114218801600301
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    References listed on IDEAS

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    Cited by:

    1. Garrett, Thomas A. & Coughlin, Cletus C., 2009. "Inter–Temporal Differences in the Income Elasticity of Demand for Lottery Tickets," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 77-99, March.
    2. Terry Ashley & Yi Liu & Semoon Chang, 1999. "Estimating net lottery revenues for states," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(2), pages 170-178, June.
    3. Linda S. Ghent & Alan P. Grant, 2007. "Are Voting and Buying Behavior Consistent? Evidence from the South Carolina Education Lottery," Public Finance Review, , vol. 35(6), pages 669-688, November.
    4. Yufei Bai & Wenjing Liu & Wujian Yang & Wen Zuo & Hemin Song, 2023. "Urbanization, Industrial Structure Upgrading, and Lottery Consumption based on the Sustainable Development of the Emerging Markets: Evidence from China," SAGE Open, , vol. 13(2), pages 21582440231, June.
    5. Cletus C. Coughlin & Thomas A. Garrett & Ruben Hernandez-Murillo, 2004. "Spatial probit and the geographic patterns of state lotteries," Working Papers 2003-042, Federal Reserve Bank of St. Louis.
    6. Mark M. Glickman & Gary D. Painter, 2004. "Do Tax and Expenditure Limits Lead to State Lotteries? Evidence from the United States: 1970-1992," Public Finance Review, , vol. 32(1), pages 36-64, January.
    7. John F. Scoggins, 1994. "Upping the Ante for Lotto: a Strategy for Enhancing State Revenues," Public Finance Review, , vol. 22(2), pages 258-264, April.
    8. Stephen Fink & Alan Marco & Jonathan Rork, 2004. "Lotto nothing? The budgetary impact of state lotteries," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2357-2367.
    9. Raymond D. Sauer, 2001. "The political economy of gambling regulation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(1-3), pages 5-15.

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