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The Efficiency of a Lottery as a Source of Public Revenue

Author

Listed:
  • William M. Rodgers

    (College of William and Mary)

  • Charles Stuart

    (University of California, Santa Barbara)

Abstract

The authors use a stochastic general-equilibrium model to study the efficiency of introducing and taxing lotteries. They calculate the efficiency gains from introducing an untaxed lottery, the efficiency gains from introducing a taxed lottery of the type observed in a typical state, and the efficiency costs of raising marginal public revenue using a tax on lotteries. Under plausible assumptions, the introduction of untaxed and taxed lotteries raises welfare, but taxes on lotteries are less efficient sources of marginal public revenue than are taxes on labor income.

Suggested Citation

  • William M. Rodgers & Charles Stuart, 1995. "The Efficiency of a Lottery as a Source of Public Revenue," Public Finance Review, , vol. 23(2), pages 242-254, April.
    • Handle: RePEc:sae:pubfin:v:23:y:1995:i:2:p:242-254
    DOI: 10.1177/109114219502300207
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-265, April.
    2. Lany DeBoer, 1986. "Lottery taxes may be too high," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 5(3), pages 594-596.
    3. Bizer, David S & Stuart, Charles, 1987. "The Public Finance of a Protective Tariff: The Case of an Oil Import Fee," American Economic Review, American Economic Association, vol. 77(5), pages 1019-1022, December.
    4. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
    5. Charles T. Clotfelter & Philip J. Cook, 1987. "Implicit Taxation in Lottery Finance," NBER Working Papers 2246, National Bureau of Economic Research, Inc.
    6. Hansson, Ingemar & Stuart, Charles, 1985. "Tax revenue and the marginal cost of public funds in Sweden," Journal of Public Economics, Elsevier, vol. 27(3), pages 331-353, August.
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    Cited by:

    1. Andrew Worthington & Kerry Brown & Mary Crawford & David Pickernell, 2007. "Gambling participation in Australia: findings from the national Household Expenditure Survey," Review of Economics of the Household, Springer, vol. 5(2), pages 209-221, June.
    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. Andrew C. Worthington & Kerry Brown & Mary Crawford & David Pickernell, 2003. "Socioeconomic And Demographic Determinants Of Household Gambling In Australia," School of Economics and Finance Discussion Papers and Working Papers Series 156, School of Economics and Finance, Queensland University of Technology.
    4. Andrew C. Worthington, 2001. "Implicit Finance in Gambling Expenditures: Australian Evidence on Socioeconomic and Demographic Tax Incidence," Public Finance Review, , vol. 29(4), pages 326-342, July.
    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. Cletus C. Coughlin & Thomas A. Garrett, 2009. "Income and Lottery Sales," Public Finance Review, , vol. 37(4), pages 447-469, July.
    7. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.

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