The Ticket to Easy Street? The Financial Consequences of Winning the Lottery
University of Kentucky
University of Pittsburgh - Department of Economics
Paige Marta Skiba
Vanderbilt University - Law School
March 26, 2010
Vanderbilt Law and Economics Research Paper No. 10-12
This paper examines whether giving large cash transfers to financially distressed people causes them to avoid bankruptcy. A comparison of Florida Lottery winners who randomly received $50,000 to $150,000 to small winners indicates that such transfers only postpone bankruptcy rather than prevent it, a result inconsistent with the negative shock model of bankruptcy. Furthermore, the large winners who subsequently filed for bankruptcy had similar net assets and unsecured debt as small winners. Thus, our findings suggest that skepticism regarding the long-term impact of cash transfers may be warranted.
Number of Pages in PDF File: 28
Keywords: Lottery; Bankruptcy; Consumer Behavior
JEL Classification: D14; K35; D12
Date posted: January 9, 2009 ; Last revised: June 24, 2010
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