Institutional Affiliation: Tilburg University
|The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery|
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In the Dutch Postcode Lottery a postal code (19 households on average) is randomly selected weekly, and prizes - consisting of cash and a new BMW - are awarded to lottery participants living in that postal code. On average, this generates a temporary, unexpected income shock equal to about eight months of income for about one third of the households in a typical winning code, while leaving the incomes of nonwinning, neighboring households unaffected. We study the responses of consumption and reported happiness of both winners and nonwinners to these shocks. Consistent with simple models of in-kind transfers, the overwhelming majority of households who won a BMW convert it into cash. With the exception of food away from home, the only 'own' effects of cash winnings we detect are on dur...
Published: “ The Effects of Lottery Prizes on Winners and Their Neighbors : Evidence from the Dutch Postcode Lottery” (with Peter Koorem a n, Adriaan Soetevent, and A rie Kapteyn) American Economic Review 101 (5) (August 2011). pp 2226 - 2247