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Means Tested Public Assistance and the Demand for State Lottery Tickets

Author

Listed:
  • John Laitner

    (University of Michigan)

Abstract

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
    as

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    References listed on IDEAS

    as
    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. John Morgan, 2000. "Financing Public Goods by Means of Lotteries," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 761-784.
    3. 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.
    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)

    Citations

    Blog mentions

    As found by EconAcademics.org, 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

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    Cited by:

    1. 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.
    2. 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.
    3. Giebeler, Constanze & Rebeggiani, Luca, 2019. "Who Loves to Gamble? Socio-Economic Factors Determining Gambling Behaviour in Germany," MPRA Paper 94735, University Library of Munich, Germany.

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    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

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