State Lotteries and Agency Costs: Hidden Costs to Nonparticipants

Abstract:     
Some nonparticipants support lotteries because they expect the lottery will shift a portion of their tax burden to participants. The principal-agent model suggests that lotteries will result in an above normal increase in state expenditures. This paper finds that 77 percent of net lottery proceeds are utilized for above normal spending increases, suggesting that tax benefits to nonparticipants are greatly diminished.

Number of Pages in PDF File: 12

Accepted Paper Series