Winning Big but Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health
45 Pages Posted: 30 Nov 2009 Last revised: 8 Jan 2014
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Winning Big but Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health
Winning Big But Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health
Date Written: January 7, 2014
Abstract
We use British panel data to determine the exogenous impact of income on a number of individual health outcomes: general health status, mental health, physical health problems, and health behaviours (drinking and smoking). Lottery winnings allow us to make causal statements regarding the effect of income on health, as the amount won by winners is largely exogenous. Positive income shocks have no significant effect on self-assessed overall health, but a significant positive effect on mental health. This result seems paradoxical on two levels. First, there is a well-known gradient in health status in cross-section data, and, second, general health should partly reflect mental health, so that we may expect both variables to move in the same direction. We propose a solution to the first apparent paradox by underlining the endogeneity of income. For the second, we show that lottery winnings are also associated with more smoking and social drinking. General health will reflect both mental health and the effect of these behaviours, and so may not improve following a positive income shock.
Keywords: Income, Self-assessed health, Mental health, Smoking, Drinking
JEL Classification: D1, I1, I3
Suggested Citation: Suggested Citation
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