IDEAS home Printed from https://ideas.repec.org/a/ntj/journl/v62y2009i1p77-99.html
   My bibliography  Save this article

Inter–Temporal Differences in the Income Elasticity of Demand for Lottery Tickets

Author

Listed:
  • Garrett, Thomas A.
  • Coughlin, Cletus C.

Abstract

We estimate annual income elasticities of demand for lottery tickets using county–level panel data for three states and find that the income elasticity of demand (and, thus, the tax burden) for lottery tickets has changed over time. This is due to changes in a state’s lottery game portfolio and the growth in consumer income more so than competition from alternative gambling opportunities. Trends in the income elasticity for instant and online lottery games appear to be different. Our results raise doubts about the long–term growth potential of lottery revenue and have policy implications for state governments and those concerned about regressivity.

Suggested Citation

  • Garrett, Thomas A. & Coughlin, Cletus C., 2009. "Inter–Temporal Differences in the Income Elasticity of Demand for Lottery Tickets," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 77-99, March.
    • Handle: RePEc:ntj:journl:v:62:y:2009:i:1:p:77-99
    DOI: 10.17310/ntj.2009.1.04
    as

    Download full text from publisher

    File URL: https://doi.org/10.17310/ntj.2009.1.04
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://doi.org/10.17310/ntj.2009.1.04
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://libkey.io/10.17310/ntj.2009.1.04?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alm, James & McKee, Michael J. & Skidmore, Mark, 1993. "Fiscal Pressure, Tax Competition, and the Introduction of State Lotteries," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(4), pages 463-476, December.
    2. Lisa Farrell & Edgar Morgenroth & Ian Walker, 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 513-526, November.
    3. Garrett, Thomas A. & Marsh, Thomas L., 2002. "The revenue impacts of cross-border lottery shopping in the presence of spatial autocorrelation," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 501-519, July.
    4. Oster, Emily, 2004. "Are All Lotteries Regressive? Evidence From the Powerball," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 179-187, June.
    5. Cletus C. Coughlin & Thomas A. Garrett & Ruben Hernandez-Murillo, 2006. "The geography, economics, and politics of lottery adoption," Review, Federal Reserve Bank of St. Louis, vol. 88(May), pages 165-180.
    6. Kearney, Melissa Schettini, 2005. "State lotteries and consumer behavior," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2269-2299, December.
    7. Donald S. Elliott & John C. Navin, 2002. "Has Riverboat Gambling Reduced State Lottery Revenue?," Public Finance Review, , vol. 30(3), pages 235-247, May.
    8. Scott, Frank & Garen, John, 1994. "Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax," Journal of Public Economics, Elsevier, vol. 54(1), pages 121-143, May.
    9. Forrest, David & Gulley, O. David & Simmons, Robert, 2000. "Elasticity of Demand for UK National Lottery Tickets," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 853-64, December.
    10. Ann Hansen, 1995. "The Tax Incidence of the Colorado State Lottery Instant Game," Public Finance Review, , vol. 23(3), pages 385-398, July.
    11. Price, Donald I. & Novak, E. Shawn, 1999. "The Tax Incidence of Three Texas Lottery Games: Regressivity, Race, and Education," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(4), pages 741-752, December.
    12. Johnson, James A, et al, 1992. "Short-Run and Long-Run Elasticities for Canadian Consumption of Alcoholic Beverages: An Error-Correction Mechanism/Cointegration Approach," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 64-74, February.
    13. Forrest, David & Gulley, O. David & Simmons, Robert, 2000. "Elasticity of Demand for UK National Lottery Tickets," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(4), pages 853-864, December.
    14. repec:bla:obuest:v:61:y:1999:i:4:p:513-26 is not listed on IDEAS
    15. Charles T. Clotfelter & Philip J. Cook, 1989. "Selling Hope: State Lotteries in America," NBER Books, National Bureau of Economic Research, Inc, number clot89-1.
    16. Mikesell, John L., 1994. "State Lottery Sales and Economic Activity," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 165-171, March.
    17. Lo, Melody & Sawyer, W. Charles & Sprinkle, Richard L., 2007. "The link between economic development and the income elasticity of import demand," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 133-140.
    18. Cook, Philip J & Clotfelter, Charles T, 1993. "The Peculiar Scale Economies of Lotto," American Economic Review, American Economic Association, vol. 83(3), pages 634-643, June.
    19. Tosun, Mehmet Serkan & Skidmore, Mark, 2004. "Interstate Competition and State Lottery Revenues," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 163-178, June.
    20. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-52, December.
    21. Mikesell, John L., 1994. "State Lottery Sales and Economic Activity," National Tax Journal, National Tax Association, vol. 47(1), pages 165-71, March.
    22. Garrett, Thomas A. & Sobel, Russell S., 1999. "Gamblers favor skewness, not risk: Further evidence from United States' lottery games," Economics Letters, Elsevier, vol. 63(1), pages 85-90, April.
    23. Olney, Martha L., 1990. "Demand for consumer durable goods in 20th century America," Explorations in Economic History, Elsevier, vol. 27(3), pages 322-349, July.
    24. Alm, James & McKee, Michael J. & Skidmore, Mark, 1993. "Fiscal Pressure, Tax Competition, and the Introduction of State Lotteries," National Tax Journal, National Tax Association, vol. 46(4), pages 463-76, December.
    25. John E. Filer & Donald L. Moak & Barry Uze, 1988. "Why Some States Adopt Lotteries and others Don'T," Public Finance Review, , vol. 16(3), pages 259-283, July.
    26. Price, Donald I. & Novak, E. Shawn, 1999. "The Tax Incidence of Three Texas Lottery Games: Regressivity, Race, and Education," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 741-52, December.
    27. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases Over the Business Cycle," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 535-552, December.
    28. Charles T. Clotfelter & Philip J. Cook, 1987. "Implicit Taxation in Lottery Finance," NBER Working Papers 2246, National Bureau of Economic Research, Inc.
    29. Mary O. Borg & Paul M. Mason & Stephen L. Shapiro, 1993. "The Cross Effects of Lottery Taxes On Alternative State Tax Revenue," Public Finance Review, , vol. 21(2), pages 123-140, April.
    30. repec:bla:econom:v:58:y:1991:i:229:p:1-16 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kent R. Grote & Victor A. Matheson, 2014. "The Impact of State Lotteries and Casinos on State Bankruptcy Filings," Growth and Change, Wiley Blackwell, vol. 45(1), pages 121-135, March.
    2. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: A Survey of the Literature," Working Papers 1109, College of the Holy Cross, Department of Economics.
    3. Levi Pérez & à lvaro Muñiz, 2021. "The income elasticity of lottery revisited: a worldwide perspective," Economics and Business Letters, Oviedo University Press, vol. 10(4), pages 403-407.
    4. Ege Can & Mark W. Nichols, 2022. "The Income Elasticity of Gross Sports Betting Revenues in Nevada: Short-Run and Long-Run Estimates," Journal of Sports Economics, , vol. 23(2), pages 175-199, February.
    5. Thomas A. Garrett & Natalia A. Kolesnikova, 2010. "Local price variation and the tax incidence of state lotteries," Working Papers 2010-035, Federal Reserve Bank of St. Louis.
    6. Giuliano Resce & Raffaele Lagravinese & Elisa Benedetti & Sabrina Molinaro, 2019. "Income-related inequality in gambling: evidence from Italy," Review of Economics of the Household, Springer, vol. 17(4), pages 1107-1131, December.
    7. William F. Fox, 2010. "Can state and local governments rely on alternative tax sources?," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 88-101.
    8. Thomas A. Garrett, 2011. "A closer look at the tax incidence of instant lottery games: an analysis by price point," Working Papers 2011-010, Federal Reserve Bank of St. Louis.
    9. Cletus C. Coughlin & Thomas A. Garrett, 2008. "Income and lottery sales: transfers trump income from work and wealth," Working Papers 2008-004, Federal Reserve Bank of St. Louis.
    10. Celeste K. Carruthers & Kara D. Smith, 2020. "Are “Education Lotteries” Less Regressive? Evidence from Texas," Southern Economic Journal, John Wiley & Sons, vol. 86(3), pages 1019-1040, January.
    11. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    12. Rose Baker & David Forrest & Levi Perez, 2016. "Modelling regional lottery sales: Methodological issues and a case study from Spain," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 127-142, March.
    13. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2014. "The Inside and Outside Revenue Impact of Regional Gambling Taxes in Spain," Growth and Change, Wiley Blackwell, vol. 45(1), pages 79-97, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas A. Garrett, 2011. "A closer look at the tax incidence of instant lottery games: an analysis by price point," Working Papers 2011-010, Federal Reserve Bank of St. Louis.
    2. Thomas A. Garrett & Natalia A. Kolesnikova, 2010. "Local price variation and the tax incidence of state lotteries," Working Papers 2010-035, Federal Reserve Bank of St. Louis.
    3. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    4. Humphreys, Brad & Perez, Levi, 2011. "Lottery Participants and Revenues: An International Survey of Economic Research on Lotteries," Working Papers 2011-17, University of Alberta, Department of Economics.
    5. Cletus C. Coughlin & Thomas A. Garrett, 2008. "Income and lottery sales: transfers trump income from work and wealth," Working Papers 2008-004, Federal Reserve Bank of St. Louis.
    6. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: A Survey of the Literature," Working Papers 1109, College of the Holy Cross, Department of Economics.
    7. Cletus C. Coughlin & Thomas A. Garrett, 2009. "Income and Lottery Sales," Public Finance Review, , vol. 37(4), pages 447-469, July.
    8. Brown, Ryan P. & Rork, Jonathan C., 2005. "Copycat gaming: A spatial analysis of state lottery structure," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 795-807, November.
    9. Linda S. Ghent & Alan P. Grant, 2007. "Are Voting and Buying Behavior Consistent? Evidence from the South Carolina Education Lottery," Public Finance Review, , vol. 35(6), pages 669-688, November.
    10. Stephen Fink & Alan Marco & Jonathan Rork, 2004. "Lotto nothing? The budgetary impact of state lotteries," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2357-2367.
    11. Kearney, Melissa Schettini, 2005. "State lotteries and consumer behavior," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2269-2299, December.
    12. David Giacopassi & Mark W. Nichols & B. Grant Stitt, 2006. "Voting for a Lottery," Public Finance Review, , vol. 34(1), pages 80-100, January.
    13. Gabrielyan, Gnel & Just, David R., 2017. "Economic Factors Affecting Lottery Sales: An Examination of Maine State Lottery Sales," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258419, Agricultural and Applied Economics Association.
    14. Richard A. Dunn & Michael A. Trousdale, 2015. "Estimating the Demand for Lottery Gambling," Public Finance Review, , vol. 43(6), pages 691-716, November.
    15. Skidmore, Mark & Serkan Tosun, Mehmet, 2008. "Do New Lottery Games Stimulate Retail Activity? Evidence from West Virginia Counties," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1), pages 1-11.
    16. Melissa S. Kearney, 2005. "The Economic Winners and Losers of Legalized Gambling," NBER Working Papers 11234, National Bureau of Economic Research, Inc.
    17. repec:ebl:ecbull:v:8:y:2003:i:10:p:1-8 is not listed on IDEAS
    18. Douglas M. Walker & John D. Jackson, 2008. "Do U.S. Gambling Industries Cannibalize Each Other?," Public Finance Review, , vol. 36(3), pages 308-333, May.
    19. Kathryn L. Combs & John A. Spry, 2012. "Who plays the numbers games in the middle of the day?," Applied Economics, Taylor & Francis Journals, vol. 44(7), pages 889-897, March.
    20. Kathryn L. Combs & John A. Spry, 2019. "The Effects Of Lotto Game Changes And Large Jackpots On Income Elasticities And Sales," Contemporary Economic Policy, Western Economic Association International, vol. 37(2), pages 261-273, April.
    21. Thomas Garrett, 2001. "An International Comparison and Analysis of Lotteries and the Distribution of Lottery Expenditures," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(2), pages 213-227.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ntj:journl:v:62:y:2009:i:1:p:77-99. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The University of Chicago Press (email available below). General contact details of provider: https://www.ntanet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.