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Means Tested Public Assistance and the Demand for State Lottery Tickets


  • John Laitner

    (University of Michigan)


Empirical evidence suggests that the poor spend a larger fraction of their income on gambling than the well-to-do. This paper shows that "means tests" for public-assistance eligibility could supply part of the explanation. Income support programs can distort private budget sets, conceivably leading to risk-taking behavior on the part of rational agents with standard, concave utility functions. Latter sections of the paper employ a calibrated life-cycle saving model to study resulting demands for actuarially fair lotteries numerically. The analysis demonstrates that allowing lotteries can simplify model-related computations a great deal. (Copyright: Elsevier)

Suggested Citation

  • John Laitner, 1999. "Means Tested Public Assistance and the Demand for State Lottery Tickets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 273-290, January.
  • Handle: RePEc:red:issued:v:2:y:1999:i:1:p:273-290
    DOI: 10.1006/redy.1998.0042

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    References listed on IDEAS

    1. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-399, April.
    2. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279-279.
    3. John Morgan, 2000. "Financing Public Goods by Means of Lotteries," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 761-784.
    4. Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-1045, December.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Why buying a lottery ticket may be rational
      by Economic Logician in Economic Logic on 2008-01-28 15:08:00
    2. Jackpot! Why longer odds will never put us off the National Lottery
      by Mark Griffiths, Director of the International Gaming Research Unit and Professor of Gambling Studies, Nottingham Trent University in The Conversation on 2015-10-14 17:29:49


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

    Cited by:

    1. 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.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs


    This item is featured on the following reading lists or Wikipedia pages:
    1. Economic Logic blog


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