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The Own and Social Effects of an Unexpected Income Shock

Author

Listed:
  • 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.

Suggested Citation

  • 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.
    • Handle: RePEc:tin:wpaper:20080048
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    References listed on IDEAS

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    More about this item

    Keywords

    social interactions; natural experiments;

    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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