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Is Lottery Gambling Addictive?

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  • Jonathan Guryan
  • Melissa Schettini Kearney

Abstract

We present an empirical test for the addictiveness of lottery gambling. To distinguish state dependence from serial correlation, we exploit an exogenous shock to local market consumption of lottery gambling. We use the sale of a winning ticket in the zip code, the location of which is random conditional on sales, as an instrument for present consumption and test for a causal relationship between present and future consumption. This test of addiction is based on the definition of addiction commonly used in the economics literature. It has two key advantages over previous tests for addiction. First, our test is unique in being based on an observed increase in consumption coming from a randomly assigned shock. Second, our approach estimates the time path of persistence non-parametrically. Our data from the Texas State Lottery suggests that after 6 months, roughly half of the initial increase in lottery consumption is maintained. After 18 months, roughly 40 percent of the initial shock persists, though estimates become less precise. These estimates provide an upper bound on the degree of addictiveness in lottery gambling. They also highlight the potential effectiveness of innovations and advertising campaigns designed to increase lottery gambling.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14742.

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Date of creation: Feb 2009
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Publication status: published as Jonathan Guryan & Melissa S. Kearney, 2010. "Is Lottery Gambling Addictive?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 90-110, August.
Handle: RePEc:nbr:nberwo:14742

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  1. Ryder, Harl E, Jr & Heal, Geoffrey M, 1973. "Optimum Growth with Intertemporally Dependent Preferences," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(1), pages 1-33, January.
  2. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju.
  3. Gary S. Becker & Michael Grossman & Kevin M. Murphy, 1990. "An Empirical Analysis of Cigarette Addiction," NBER Working Papers 3322, National Bureau of Economic Research, Inc.
  4. Oster, Emily, 2004. "Are All Lotteries Regressive? Evidence from the Powerball," National Tax Journal, National Tax Association, vol. 57(2), pages 179-87, June.
  5. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  6. Charles T. Clotfelter & Philip J. Cook, 1991. "The "Gambler's Fallacy" in Lottery Play," NBER Working Papers 3769, National Bureau of Economic Research, Inc.
  7. Boyer, Marcel, 1978. "A Habit Forming Optimal Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 585-609, October.
  8. Melissa Schettini Kearney, 2002. "State Lotteries and Consumer Behavior," NBER Working Papers 9330, National Bureau of Economic Research, Inc.
  9. Farrell, Lisa & Morgenroth, Edgar & Walker, Ian, 1999. " A Time Series Analysis of U.K. Lottery Sales: Long and Short Run Price Elasticities," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 513-26, November.
  10. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, Econometric Society, vol. 62(2), pages 467-75, March.
  11. Becker, Gary S & Murphy, Kevin M, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(4), pages 941-64, November.
  12. Jonathan Guryan & Melissa S. Kearney, 2008. "Gambling at Lucky Stores: Empirical Evidence from State Lottery Sales," American Economic Review, American Economic Association, American Economic Association, vol. 98(1), pages 458-73, March.
  13. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, American Economic Association, vol. 67(2), pages 76-90, March.
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Cited by:
  1. Brad Humphreys & Levi Perez, 2012. "Network externalities in consumer spending on lottery games: evidence from Spain," Empirical Economics, Springer, Springer, vol. 42(3), pages 929-945, June.
  2. De Paola, Maria & Scoppa, Vincenzo, 2014. "Media exposure and individual choices: Evidence from lottery players," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 385-391.
  3. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers, College of the Holy Cross, Department of Economics 1110, College of the Holy Cross, Department of Economics.

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