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The Effects of Lottery Prizes on Winners and their Neighbors: Evidence from the Dutch Postcode Lottery

Author

Listed:
  • Kuhn, Peter J.

    (University of California, Santa Barbara)

  • Kooreman, Peter

    (Tilburg University)

  • Soetevent, Adriaan R.

    (University of Amsterdam)

  • Kapteyn, Arie

    (University of Southern California)

Abstract

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

Suggested Citation

  • 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 of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4950
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    More about this item

    Keywords

    natural experiments; social interactions;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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