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

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Author Info

  • 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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4950.

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Length: 33 pages
Date of creation: May 2010
Date of revision:
Publication status: published in: American Economic Review, 2011, 101 (5), 2226-2247
Handle: RePEc:iza:izadps:dp4950

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Keywords: natural experiments; social interactions;

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  7. Shefrin, Hersh M & Thaler, Richard H, 1988. "The Behavioral Life-Cycle Hypothesis," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 609-43, October.
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  9. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
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  12. Peter Kuhn & Peter Kooreman & Adriaan R. Stoetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery," Working Papers 574, RAND Corporation Publications Department.
  13. Martin Browning & Thomas F. Crossley, 2004. "Shocks, stocks and socks: smoothing consumption over a temporary income loss," CAM Working Papers 2004-05, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
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  15. Peter Kuhn & Peter Kooreman & Adriaan R. Soetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock," Tinbergen Institute Discussion Papers 08-048/1, Tinbergen Institute, revised 05 May 2010.
  16. Zeelenberg, M. & Pieters, R., 2004. "Consequences of regret aversion in real life: The case of the Dutch postcode lottery," Open Access publications from Tilburg University urn:nbn:nl:ui:12-126233, Tilburg University.
  17. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, 01.
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  20. Martin Browning & Thomas Crossley, 2003. "Shocks, Stocks and Socks," Department of Economics Working Papers 2003-07, McMaster University.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Talking the economy down
    by chris dillow in Stumbling and Mumbling on 2010-12-01 18:08:38
  2. The Effects of Lottery Prizes on Winners and their Neighbors
    by Ariel Goldring in Free Market Mojo on 2010-06-22 11:23:28
  3. The macroeconomic challenge
    by chris dillow in Stumbling and Mumbling on 2014-02-19 14:07:50
  4. Incomes & satisfaction
    by chris dillow in Stumbling and Mumbling on 2014-07-06 12:53:41
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