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Public Finance Review
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Income and Lottery Sales

Transfers Trump Income from Work and Wealth

Cletus C. Coughlin

Federal Reserve Bank of St. Louis

Thomas A. Garrett

Federal Reserve Bank of St. Louis, garrett{at}stls.frb.org

The effect of income on lottery expenditures has generally been studied using an aggregate measure of income, usually personal income. Reasons exist for thinking that lottery expenditures do not respond equally to all sources of income. This article examines lottery consumption and income from three sources, namely income from earnings, wealth, and transfer payments. Using county-level data for seven states and controlling for demographic and other characteristics, we find that each source of income has a different effect on lottery ticket expenditures. A noteworthy finding is that purchases are most strongly influenced by transfer payments. Several policy implications follow from our results.

Key Words: state lotteries • consumption • transfer • income

This version was published on July 1, 2009

Public Finance Review, Vol. 37, No. 4, 447-469 (2009)
DOI: 10.1177/1091142109331637


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