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The Own and Social Effects of an Unexpected Income Shock

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Author Info

  • Peter Kuhn

    ()
    (University of California at Santa Barbara)

  • Peter Kooreman

    (Tilburg University)

  • Adriaan R. Soetevent

    ()
    (University of Amsterdam (ASE))

  • Arie Kapteyn

    (RAND and Tilburg University)

Abstract

Each week, the Dutch Postcode Lottery (PCL) randomly selects a postal code, and distributes cash and a new BMWto 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 otherdurables. 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 towinners have significantly higher levels of car consumption than other nonparticipants.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-048/1.

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Date of creation: 15 May 2008
Date of revision: 05 May 2010
Handle: RePEc:dgr:uvatin:20080048

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Web page: http://www.tinbergen.nl

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Keywords: social interactions; natural experiments;

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  4. Stevenson, Betsey & Wolfers, Justin, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6944, C.E.P.R. Discussion Papers.
  5. repec:att:wimass:9127 is not listed on IDEAS
  6. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 531-42, July.
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  8. Martin Browning & Thomas Crossley, 2003. "Shocks, Stocks and Socks," Department of Economics Working Papers 2003-07, McMaster University.
  9. Jeffrey R. Kling & Jens Ludwig & Lawrence F. Katz, 2005. "Neighborhood Effects on Crime for Female and Male Youth: Evidence from a Randomized Housing Voucher Experiment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(1), pages 87-130, January.
  10. Esther Duflo & Emmanuel Saez, 2002. "The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment," NBER Working Papers 8885, National Bureau of Economic Research, Inc.
  11. Sumit Agarwal & Chunlin Liu & Nicholas S. Souleles, 2007. "The Reaction of Consumer Spending and Debt to Tax Rebates -- Evidence from Consumer Credit Data," NBER Working Papers 13694, National Bureau of Economic Research, Inc.
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Cited by:
  1. repec:hal:wpaper:halshs-00566789 is not listed on IDEAS
  2. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA).
  3. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, MIT Press, vol. 8(1), pages 90-119, 03.
  4. Bénédicte Apouey & Andrew E. Clark, 2013. "Winning big but feeling no better? The effect of lottery prizes on physical and mental health," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 51570, London School of Economics and Political Science, LSE Library.
  5. Kuhn, Peter J. & Kooreman, Peter & Soetevent, Adriaan R. & Kapteyn, Arie, 2010. "The Effects of Lottery Prizes on Winners and their Neighbors: Evidence from the Dutch Postcode Lottery," IZA Discussion Papers 4950, Institute for the Study of Labor (IZA).

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