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Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health

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  • Benedicte Apouey
  • Andrew E. Clark

Abstract

We use British panel data to determine the exogenous impact of income on a number of individual health outcomes: general health status, mental health, physical health problems, and health behaviours (drinking and smoking). Lottery winnings allow us to make causal statements regarding the effect of income on health, as the amount won by winners is largely exogenous. Positive income shocks have no significant effect on self‐assessed overall health, but a significant positive effect on mental health. This result seems paradoxical on two levels. First, there is a well‐known gradient in health status in cross‐sectional data, and second, general health should partly reflect mental health, so that we may expect both variables to move in the same direction. We propose a solution to the first apparent paradox by underlining the endogeneity of income. For the second, we show that lottery winnings are also associated with more smoking and social drinking. General health will reflect both mental health and the effect of these behaviours and so may not improve following a positive income shock. Copyright © 2014 John Wiley & Sons, Ltd.

Suggested Citation

  • Benedicte Apouey & Andrew E. Clark, 2015. "Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 516-538, May.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:5:p:516-538
    DOI: 10.1002/hec.3035
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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • I1 - Health, Education, and Welfare - - Health
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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