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

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  • 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
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    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: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    7. 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.
    8. 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.
    9. 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.

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