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

Author

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  • Peter Kuhn
  • Peter Kooreman
  • Adriaan Soetevent
  • Arie Kapteyn

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. JEL: D14, D91, H23, H27

Suggested Citation

  • Peter Kuhn & Peter Kooreman & Adriaan Soetevent & Arie Kapteyn, 2011. "The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery," American Economic Review, American Economic Association, vol. 101(5), pages 2226-2247, August.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:5:p:2226-47
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    More about this item

    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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